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CHINA’S offshore oil specialist CNOOC has no plan to buy oil firms abroad during the global financial crisis, and will look instead for foreign partners to make joint investments, chairman Fu Chengyu said yesterday.

Awash with capital and facing strong domestic demand for fuel, Chinese energy firms have been encouraged by Beijing to take advantage of the financial crisis to make overseas acquisitions.

Fu said that due to the ever-intensifying protectionism and the lack of understanding about Chinese companies, CNOOC had to adjust its overseas expansion strategy.

“Our company will not engage in any deals of acquiring other firms in the next couple of years. Instead, we will seek partners who need to make investments and form joint ventures with them,” Fu told a session of the Boao Forum for Asia on the Chinese island province of Hainan.

“This is our future strategy. At least during the financial crisis, we will not buy other firms,” he added.

CNOOC, the parent of CNOOC Ltd, has been snubbed in overseas acquisitions, most notably in 2005 when US political opposition blocked CNOOC Ltd’s US$18.5bil bid for oil company Unocal.

Realising the difficulties in acquiring firms, China, the world’s second largest oil consumer, has clearly adopted a loan-for-resources strategy to gain easier access to cashstrapped but energy rich nations Beijing in recent months signed a series of loanforoil pacts with oil producers Kazakhstan, Russia, Brazil and Venezuela.

At home, CNOOC has offered 17 offshore blocks for foreign cooperation this year, although most of them were tendered a year ago and attracted little interest.

CNOOC normally teams up with foreign firms to hunt for oil and gas off China’s shores, but once a commercial find is made, CNOOC holds the right to take a 51% stake in the discovery.

Fu said that the slumping raw material prices and economic downturn offered a good chance for his company to make investments to get ready for the next economic boom.

“Now investment costs are the lowest. Prices will surge again when the economy picks up and inflation rises,” Fu said.

“It’s a good chance for us to invest, both in the upstream and downstream sectors as our construction cycle is about 35 years. When the crisis leaves us in 35 years, we will be in a more positive position,” he added. – Reuters

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China National Offshore Oil Corp (CNOOC) aims to raise as much as 80 billion yuan (US$11.7bil) to finance aggressive expansion plans this year, a senior executive said yesterday.

The move comes as the company faces niggling cash flow problems and plummeting revenues following the collapse in world crude prices.

“We are currently preparing to issue mid-term notes. We have already submitted the application and we will make an announcement once we hear the result,” Wu Mengfei, the company’s chief financial officer, told reporters on the sidelines of an industry conference.

The debt financing would be carried out over several stages, he said, without providing further detail.

He said the move would help the company – the state-owned parent of Hong Kong-listed CNOOC Ltd – take advantage of falling steel and raw material costs and raise the pace of construction on a number of exploration projects along the Chinese coast.

CNOOC chairman Fu Chengyu revealed on the sidelines of the recent meeting of the National People’s Congress that the company would invest a total of US$16.5bil this year, 26% higher than in 2008.

Wu said that the company was currently looking into the possibility of expanding its 12 million-tonne refining joint venture with Shell in Huizhou in southeastern China’s Guangdong province, the first phase of which is scheduled to go into full operation later this year.

CNOOC is also looking at other potential refining projects across the country, and continues to eye a number of overseas acquisition targets, Wu said.

“The world economy (in its weakened state) will produce a great deal of opportunities,” he said.

“We will make our own preparations. After our attempt to acquire Unocal (in 2005) everyone knows CNOOC, and knows that CNOOC is a good buyer. We receive letters every day from people trying to sell something to us. We have a special team currently conducting research into the opportunities.”

Wu said that CNOOC has emerged from the world financial crisis relatively unscathed, but it was still struggling under the impact of last year’s rapid drop in the global price of oil.

“The oil price cut has had a bigger impact. Compared with last year, our cash profits are much lower. We are facing shrinking oil revenues and cash flow problems, but our financing ability remains very strong.”

“With oil prices at $40 a barrel, we can still make a profit,” he said. – Reuters

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