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Henry_Chinaski
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Joined: Aug 16, 2003
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Oct 12, 2005 - 02:59 AM |
 
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| Post subject: Japan and China - Oil and Gas in troubled waters.... |
Japan and China
Oil and gas in troubled waters
Oct 6th 2005 | BEIJING AND TOKYO
From The Economist print edition
Two resource-hungry nations square off in the East China Sea
Get article background
FOR China and Japan this has been an exceptionally difficult year in an always troubled relationship. Among their many disagreements, which in April triggered the biggest anti-Japanese prοtests in communist China's history, is a long-simmering territorial dispute in the East China Sea that lately has taken a turn for the worse. With Japanese officials and politicians accusing China of deploying “gunboats”, nationalist sentiment on both sides is complicating efforts for a resolution.
Two days of talks in Tokyo ended on October 1st with no agreement on the dispute, which focuses on the exploitation of undersea oil and gas deposits straddling what Japan says is the border line between the two countries' exclusive economic zones (EEZs). China does not recognise the border line and says that in any case its drilling is in an undisputed area. Japan says China's activities could suck gas from its side of the line.
Three weeks before the talks—the third round since October last year—the Chinese navy made a dramatic appearance near a Chinese drilling platform at the Chunxiao field (known by the Japanese as Shirakaba). It deployed five vessels, including missile-equipped destroyers and frigates. Last week, Japanese officials said that one of the boats had turned a gun turret—but had not locked its radar—on to a Japanese P3-C reconnaissance aircraft that was monitoring the activity. Keizo Takemi, a veteran politician who heads the ruling Liberal Democratic Party's parliamentary group on marine resources, calls this “gunboat diplomacy”. As Mr Takemi puts it: “The Chinese side have used military power to leverage their political situation. The squadron was an attack squadron and its purpose was quite clear—to strengthen against the Japanese position. This is a really unfortunate development, for it could lead to the kind of vicious cycle that descends into military conflict.”
Last week, China confirmed that it had set up a “reserve vessel squadron” in the East China Sea. Despite Japan's calls for drilling activities near the disputed border line to be suspended pending an agreement, Japan says it suspects that China recently began production of gas or oil at the Tianwaitian field (called Kashi in Japanese) near Chunxiao. The Japanese believe Tianwaitian's resources might also straddle the line.
Japan too has been stepping up the pressure. In July it granted drilling rights in the area, including in the Japanese-claimed side of Shirakaba, to a Japanese company, Teikoku Oil (it does not help that this means Imperial Oil). Were Teikoku to begin drilling, this would raise tensions enormously, since the line China claims as the EEZ boundary puts the site well within China's side.
So who is in the right? Unfortunately, there is no clear answer. Under the UN's Convention on the Law of the Sea, an EEZ can extend up to 200 nautical miles from a country's shoreline. But the East China Sea between China and Japan is only about 360 nautical miles at its very widest. Japan says the boundary should be the median line between the two countries. China says its EEZ should extend to the edge of its continental shelf, which would put the line almost up against Japan's shores. The convention does not give specifics of how overlapping EEZ and continental shelf claims should be resolved.
There are some positive signs. Japan says it will be very careful not to be drawn into any tit-for-tat response to China's naval deployments. And China, though insistent at last week's talks on pushing its continental shelf approach, did not reject outright a proposal by Japan for joint development of fields straddling the median line. To Japan's annoyance, however, China did raise the issue of possible joint exploration near the Senkaku Islands—Diaoyutai in Chinese—which are controlled by Japan but claimed by China. Japan worries that China's efforts to focus on this area are intended to undermine Japan's sovereignty claim.
Mindful perhaps of the danger of rekindling the nationalist sentiment that erupted with such fury in Chinese cities in April, the official media in China have been low-key in their coverage of recent developments. A Japanese official says that his side has been trying to focus instead on the business potential of joint development. “Once it becomes a territorial issue, it can get very nasty and very difficult to solve,” he says. But it may already be too late.
Isn't it all ironic???
China has been growing at 7-10% a year for the past 25 years. Every fuqing body that knows anything about economics KNOWS that they will need resources. China, or truth be said, a Chinese state owned company tries to lawfully acquire an american MINOR PLAYER that has almost NO ASSETS close to America (Unocal). The US, in a disguised populistic squizofrenic act of McArthism, clearly indicated that they would politically not allow the acquisition. China, obviouslly, withdraws the offer but SURPRISE, they still need the fqing oil.
China then will OBVIOUSLLY play hard ball with anyone pissing with what they might consider is critical for them. Result: big tension between China and Japan.
Will China back off? Of course it will not, and it shouldn't. It already learned the lesson that if it plays according to the rules it will get fuqd, so, why put your long-term future on the line ifi you know you will get screwed if you do it gently?
Ironic thing is that the US will probably, sooner or later, send some vessels there. China will of course NOT point their weapons to a US jet or try anything funny.
However, the US will only do that (and try to provoke a little bit of tension) in January, or maybe some weeks later, when the new Fed president will be elected and the markets will test him (just like happened with the big crash of 87 with Greenspan 2 months in the presidency of the Fed). Everybody will forget about the disaster of "black-February 2006" while they watch the Pacific Fleet making exercises with the Japanese navy. I can see Fox News people creaming their little Jesus H.Christ underwear already.
No surprises. One thing leading to the other. |
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MaomingMaster
Board Legend
Joined: Feb 03, 2004
Posts: 11059
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Oct 12, 2005 - 08:30 AM |
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I have no idea what the article has to do with your extremely biased opinion.
That whole area of islands between Japan, China and Taiwan is a very negligable point.
The main children, sorry, protagonists, China and Japan, claim sovereignty to many islands that could just be argued as a moot point.
I found out yesterday that there is a beautiful, sub-tropical isalnd a boat-ride away from the shores of Taiwan that belongs (apparently) to Japan. If China 'reclaim' Taiwan (scare quotes intended) would this island be included do you think? |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Oct 12, 2005 - 08:57 AM |
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Like if your opinions weren't biased "Mr. Never Say Sorry All Generalizations Are Really Cool?"
I know that it is very hard to see the link between China needing oil and China being barred from acquiring oil assets legally. It's a long shot isn't it? 
"Nurse! Quick! Bring the defribilator." |
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rutuman
Low Seater
Joined: June 21, 2005
Posts: 3231
Status: Offline
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Oct 12, 2005 - 10:25 AM |
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^ but is there actually oil?
if not who the funk cares who wins same crap, uninhabited rocks in the middle of a polluted sea? |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Oct 12, 2005 - 10:47 AM |
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They have drilling equipment already, this means all the probes and stuff revealed at least a large probability of having oil.
And I guess that given latest oil prices all countries will first try to secure exploration rights and then actually see if there is oil or not, not to mention the pride, competing nations, blablabla.
So, I think they are actually fighting for something here... |
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MaomingMaster
Board Legend
Joined: Feb 03, 2004
Posts: 11059
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Oct 12, 2005 - 10:52 AM |
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| Henry_Chinaski wrote: |
Like if your opinions weren't biased "Mr. Never Say Sorry All Generalizations Are Really Cool?"
I know that it is very hard to see the link between China needing oil and China being barred from acquiring oil assets legally. It's a long shot isn't it?
"Nurse! Quick! Bring the defribilator." |
You're such a baby.......
Hey look, arseclown, it's your thread. |
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MaomingMaster
Board Legend
Joined: Feb 03, 2004
Posts: 11059
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Oct 12, 2005 - 11:00 AM |
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Give these islands back to North Korea! |
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MaomingMaster
Board Legend
Joined: Feb 03, 2004
Posts: 11059
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Oct 12, 2005 - 11:04 AM |
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I can understand your logic though....
It's whoever has the greatest need fro oil gets the land rights. Yes?
So America had the right to invade Iraq and take the oil there. Let's face it, their need is greater than Iraq. |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Oct 12, 2005 - 11:37 AM |
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| MaomingMaster wrote: |
I can understand your logic though....
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No you cannot.
The only thing you think you understand is China is bad and Japan is good no matter what.
Like, you would never say that japanese racism towards people from hiroshima and nagasaki is bad. But you would say that shanghainese racism towards waidiren is bad. Or would you?
If you want to discuss facts, then discuss facts. But dont try to second guess peoples' posts. Don't try to say any of the arguments are wrong because person A or B is saying it.
This is not open chat mmm. We are trying to have a discussion here and you came up with your customary attack, so, give it a break.
Your problem is every time someone says something you judge not what is being said, but who is saying it.
Give it a break. |
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MaomingMaster
Board Legend
Joined: Feb 03, 2004
Posts: 11059
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Oct 12, 2005 - 11:55 AM |
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^ You're not helping your own argument there, pal.
I do think the Japanese are disgusting racists. Practically every day I have to put up with a bunch of frustrated bitches bitching about how 'dirty' China is and how 'disgusting' the Chinese are. Or Japanese guys bicthing about exactly the same shiit as their dumb wives while quite content to get handjobs off peasant girld from Anhui after work.
The Japanese being polite is just a load of bullshiit. Just like when the Chinese tell me they are 'kind'.
However. back to YOUR topic.
China needs the oil so they have the right to it.
is that what you're saying? |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Oct 12, 2005 - 12:11 PM |
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No it is not.
There are islands in the middle of nothing with potential for oil. Every single country on Earth would go hard for them if they could. The degree of hard here will vary a bit though.
Due to past unsuccessful lawful attempts in acquiring oil security, China will go harder for it, like any other country (including Japan) would.
So, is China a bully? Yes.
Could this have been avoided? Yes it could.
It is geopolitics: you put somebody in need of something in a tough spot and their margin to manuever will decrease. You for sure can expect a reaction with increased energy in the future to mitigate the risks of successive failures.
You don't have to look very far away in history to see what happens when you screw a country too badly (Versailles).
Not saying it is justifiable, not saying China is right, not saying Japan is wrong. Just saying that a side effect of the American policy to bar China politically from getting closer to oil security has a side effect of increasing tension elsewhere.
It's a side fkng effect.
Japan need a lot of oil too. Perhaps not as badly as China. It needs at least to DECREASE its risk and dependency from the Middle East (Japan basically paid 10 billion usd for the US for the Gulf War I). |
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MaomingMaster
Board Legend
Joined: Feb 03, 2004
Posts: 11059
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Oct 12, 2005 - 12:19 PM |
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Versailles?
Sorry, my knowledge of Versailles is a huge palace outside of Paris.
What about Versailles? |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Oct 12, 2005 - 12:39 PM |
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The Versailles Treaty is said to have imposed a tremendous unnecessary hardship to Germany, which in turn fertilized the soil for rabic movements to develop (nacional socialism). Some say that if Versailles Treaty was lighter on Germany, they would recover faster and have lower chances of developing "undesirable tendencies" to overcome their hardship. Again, it's not me saying it. Eric Robsbawn and the likes. Those are the facts, this is one of the currents analysing the treaty. I had other effects too in China (4th May Movement and all that) regarding japanese ports and all that.
The logic goes like this: if you win, be sure to give an alternative to the defeated party, otherwise the net effect of winning might not necessarily be positive down the road.
I think nobody but the arms industry win with increasing tensions between China and Japan. An unfortunate side effect of the nationalistic approach from the US might have been putting China in a mood where it needs to be firmer, and that is shite.
We clear? |
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ShanghaiUnderground
StreetBeater
Joined: July 15, 2004
Posts: 2413
Location: Shanghai
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Oct 12, 2005 - 12:48 PM |
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And the Great Game continues:
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China seen sealing $4.2 bln PetroKazakhstan deal
SINGAPORE, Oct 7 (Reuters) - Strong Sino-Kazakh ties are likely to ensure that China's state oil company CNPC wins its $4.2 billion Kazakh oil prize, even as signs emerge that the Kazakhstan government wants a piece of the action.
Some investors fear that the CNPC bid for Canada-listed PetroKazakhstan may go the same way as CNOOC Ltd.'s $18.5 billion grab for the U.S. producer Unocal that was thwarted by protectionist U.S. legislators.
Kazakhstan's lower house of parliament voted this week to let the state intervene in sales of foreign-held stakes of oil companies -- something it has already shown a willingness to do, as Britain's BG Group found out when it tried to sell a stake in the Kashagan field in 2003.
Adding to uncertainty surrounding the CNPC deal, Russian oil major Lukoil now claims it has pre-emptive rights to some of PetroKazakhstan's assets.
But Tong Xiaoguang, a senior adviser to CNPC's overseas operations, said the company had an understanding with the Kazakh government ahead of the deal.
"Before we decided to acquire it, we had notified the Kazakh government and they agreed to the plan," he said.
PetroKazakhstan shares have fallen 5 percent below CNPC's offer of $55 apiece, echoing investor concerns that the deal could fail.
"There certainly seems to be a lot of concern emerging in Kazakhstan about the sale of PetroKazakhstan to CNPC," said Stephen O'Sullivan, Moscow-based oil and gas analyst for United Financial Group.
But at least one U.S.-based takeover trader, or arbitrageur, said he might buy PetroKazakhstan shares now, and sources close to the deal said there was nothing to worry about.
"I don't think Kazakhstan is in the mood to give China another slap on the face," a source close to CNPC said, dismissing the vote from Kazakhstan's lower house of parliament on Wednesday as "posturing" that was unlikely to derail the deal.
The deal was announced soon after Chinese President Hu Jintao's July visit to the ex-Soviet Central Asian state, and the Kazakh government certainly would have to think twice before blocking the asset sale to neighbouring China, the world's second-largest oil market, analysts and banking sources said.
"I would be surprised if this was unexpected by CNPC since I believe that some form of political understanding between Kazakhstan and China will have been reached," O'Sullivan said.
CNPC is determined to win the deal as Beijing does not want to see yet another failure in its overseas acquisitions, according to sources close to the CNPC-Petrokazakhstan deal. The deal would mark China's largest overseas takeover to date.
CNOOC Ltd. and Sinopec Corp. , China's second largest oil company, were thwarted in Kazakhstan in 2003, not by the government, but by a group of western oil firms.
Britain's BG Group agreed to sell its stake in Kazakhstan's Kashagan field to the Chinese pair, but its Western partners used their right of first refusal to snatch the stake. The Kazakh government then stepped in to buy the asset. The Western firms backed down and Kazakhstan got its way.
CNPC is already well-established in Kazakhstan, its second-largest production source after Sudan. CNPC and the Kazakh government are also building a 1,000-km pipeline pumping crude oil from the Caspian region to China.
The takeover bid by CNPC International, a subsidiary of CNPC, has been accepted by PetroKazakhstan's board and is due to be approved by PetroKazakhstan's shareholders on Oct. 18. CNOOC had never won the backing of Unocal's board.
CNPC can easily swallow up PetroKazakhstan, whereas the Unocal bid by CNOOC was largely funded by cheap state loans, drawing sharp U.S. criticism.
And unlike CNOOC Ltd., a listed company which came under pressure from minority shareholders for overpaying for Unocal, CNPC as a wholly-owned state entity has the patience to go with the process, analysts said.
United Financial's O'Sullivan said it was possible that the Kazakh government might use its first right of refusal to keep PetroKazakhstan's Shymkent refinery, the most modern of only three oil refineries in the country.
For CNPC, it is fine if the Kazakh government just wants the refinery, analysts said. After all, what matters to CNPC is its upstream assets. CNPC itself is already building a big refinery in northwestern China to process Kazakh crude to be delivered by the cross-border pipeline.
It's unclear whether Lukoil really holds the pre-emption right to PetroKazakhstan's stake in their joint venture, given that CNPC is buying the whole company. Even if it does, Lukoil would be careful about using it so as not to sour its relationship with the Kazakh government.
Lukoil's $2 billion bid for Toronto-listed Nelson Resources this month also raises the possibility of cooperation between Russia's largest oil company and CNPC in Kazakhstan.
"Nelson Resources itself has a joint venture at the North Buzachi field with CNPC. There is clearly in my view scope for an asset swap here so that both sides feel happy," O'Sullivan said.
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Another article related to China oil exploration/development in Alberta, Canada is here, dated Jan. 2005:
http://www.fromthewilderness.com/free/ww3/012705_china_canada.shtml
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| Canada has the world's largest oil reserves after Saudi Arabia ... |
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"And this also," said Marlow suddenly, "has been one of the dark places of the earth." |
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ShanghaiUnderground
StreetBeater
Joined: July 15, 2004
Posts: 2413
Location: Shanghai
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Oct 12, 2005 - 01:05 PM |
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I would think that by increasing the transparency and accountability of how Chinese companies operate would help alleviate some concerns by foreign investors and shareholders of foreign firms. But it appears that the Chinese government controls their oil companies by the short hairs, and as such the playing field may not appear too open or fair.
But then with oil being a most strategic resource, how can governments not step in. |
_________________
"And this also," said Marlow suddenly, "has been one of the dark places of the earth." |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Oct 12, 2005 - 01:13 PM |
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Half of CNOOC's board apparently is composed of foreigners. The guy running the show is western educated and worked for a number of principals abroad.
Maybe it's different in other companies though.
Obviouslly there was a lot of state money in the bid but then most countries have nationalized oil companies anyway i.e. that aint no excuse. |
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MaomingMaster
Board Legend
Joined: Feb 03, 2004
Posts: 11059
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Oct 12, 2005 - 01:52 PM |
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| Quote: |
| I think nobody but the arms industry win with increasing tensions between China and Japan. An unfortunate side effect of the nationalistic approach from the US might have been putting China in a mood where it needs to be firmer, and that is shite. |
Yes, it is. It's also the perfect excuse for China to reinforce it's belief that the islands are Chinese. I'm not saying they ain't, but any excuse to bite at the japanese, right? |
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ShanghaiUnderground
StreetBeater
Joined: July 15, 2004
Posts: 2413
Location: Shanghai
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Oct 12, 2005 - 02:19 PM |
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Probably worthwhile to examine previous global mergers/acquisitions in the oil industry over the years, for example, BP-Amoco, Royal Dutch Oil-Shell. |
_________________
"And this also," said Marlow suddenly, "has been one of the dark places of the earth." |
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wolfy
Fire-eater
Joined: Sep 13, 2004
Posts: 2510
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| Posted:
Oct 12, 2005 - 02:22 PM |
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| Henry_Chinaski wrote: |
Half of CNOOC's board apparently is composed of foreigners. The guy running the show is western educated and worked for a number of principals abroad.
Maybe it's different in other companies though.
Obviouslly there was a lot of state money in the bid but then most countries have nationalized oil companies anyway i.e. that aint no excuse. |
2 out of the 12 directors are foreigners and they are both non-executives. |
_________________
Good old English spirit! http://www.youtube.com/watch?v=7MG27BKwjaI |
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Edgewood
FooSlinger
Joined: Jan 28, 2004
Posts: 3906
Location: Colonial Shanghai
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Oct 12, 2005 - 02:23 PM |
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| Quote: |
Isn't it all ironic???
China has been growing at 7-10% a year for the past 25 years. Every fuqing body that knows anything about economics KNOWS that they will need resources. China, or truth be said, a Chinese state owned company tries to lawfully acquire an american MINOR PLAYER that has almost NO ASSETS close to America (Unocal). The US, in a disguised populistic squizofrenic act of McArthism, clearly indicated that they would politically not allow the acquisition. China, obviouslly, withdraws the offer but SURPRISE, they still need the fqing oil.
China then will OBVIOUSLLY play hard ball with anyone pissing with what they might consider is critical for them. Result: big tension between China and Japan.
Will China back off? Of course it will not, and it shouldn't. It already learned the lesson that if it plays according to the rules it will get fuqd, so, why put your long-term future on the line ifi you know you will get screwed if you do it gently?
Ironic thing is that the US will probably, sooner or later, send some vessels there. China will of course NOT point their weapons to a US jet or try anything funny.
However, the US will only do that (and try to provoke a little bit of tension) in January, or maybe some weeks later, when the new Fed president will be elected and the markets will test him (just like happened with the big crash of 87 with Greenspan 2 months in the presidency of the Fed). Everybody will forget about the disaster of "black-February 2006" while they watch the Pacific Fleet making exercises with the Japanese navy. I can see Fox News people creaming their little Jesus H.Christ underwear already.
No surprises. One thing leading to the other. |
Your chain of logic is missing a few links. Just because some random events have happened at a similar time, does not mean that they are in any way related.
This is like saying that Global Warming is a direct result of the decrease in the number of Pirates in the Carribbean (thank you, SpagMonster). |
_________________
Conlige suspectos semper habitos |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Oct 12, 2005 - 02:30 PM |
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| wolfy wrote: |
| Henry_Chinaski wrote: |
Half of CNOOC's board apparently is composed of foreigners. The guy running the show is western educated and worked for a number of principals abroad.
Maybe it's different in other companies though.
Obviouslly there was a lot of state money in the bid but then most countries have nationalized oil companies anyway i.e. that aint no excuse. |
2 out of the 12 directors are foreigners and they are both non-executives. |
Interesting. I thought they had more foreigners in the board.
What's your source for this info by the way wolfy? |
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wolfy
Fire-eater
Joined: Sep 13, 2004
Posts: 2510
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| Posted:
Oct 12, 2005 - 02:39 PM |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Oct 12, 2005 - 02:49 PM |
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Ok thanks.
Below some info on their CEO:
China's gas guzzler
Jun 23rd 2005
From The Economist print edition
Fu Chengyu must balance China's thirst for energy with its desire for corporate respectability
FOR a man about to make the biggest decision of his career—one that could trigger a huge political backlash in America—Fu Chengyu seemed remarkably relaxed earlier this week. Sitting in a stately meeting room in his Beijing offices, the blunt, English-speaking 54-year-old chairman and chief executive of China National Offshore Oil Corporation (CNOOC) joked that the outcome could “make me a hero or a martyr”. On June 23rd Mr Fu took the plunge, making an offer of $18.5 billion (excluding debt) for Unocal, a California-based oil and gas company.
This is the largest foreign takeover yet attempted by a Chinese firm—and a contested one, to boot. On April 4th, Unocal agreed to be acquired by Chevron, the second-biggest American oil firm, in a deal worth $17 billion (excluding debt). With Sino-American relations already strained, the prospect of a state-owned Chinese company buying a big American energy firm is causing ructions in Washington, DC, ostensibly over potential national-security risks, and may also do so elsewhere in Asia, where most of Unocal's gas reserves are located.
Mainland China's top companies are becoming increasingly ambitious and aggressive in their pursuit of foreign assets, their competitiveness boosted by ready access to (effectively free) state cash. Last month, computer-maker Lenovo completed its $1.75 billion acquisition of IBM's personal-computer operations. On June 20th, Haier, China's leading white-goods maker, launched a $1.3 billion cash offer for Maytag, an ailing American rival, trumping Ripplewood, a private-equity firm. But the Unocal deal is something new, not only because it is much bigger and more politically sensitive, but also because CNOOC has, until now, behaved like a commercial, western firm in the bidding process, rather than as an arm of the Chinese government.
Since its flotation in 2001, CNOOC has earned a reputation as one of China's best managed firms. Its shares trade at a premium over those of its larger listed rivals, PetroChina and Sinopec. Mr Fu's market-friendly rhetoric, reflecting his experience of western business (he got a masters degree in California and worked for Phillips, an American oil firm), has contributed to its reputation. “Transparency makes shareholders love you,” he says. So does having four respected non-executive directors, including two non-Chinese: Evert Henkes, a former Shell executive, and Kenneth Courtis, vice-chairman of Goldman Sachs in Asia.
Buying Unocal could threaten this hard-won credibility. Analysts and minority investors, who own 30% of the stock, are concerned. CNOOC is offering 9% more than Chevron. Then there are integration and political risks and a big pile of fresh debt. The Chinese offer is in cash—the shares even of a well-run Chinese firm are not yet acceptable as takeover currency.
It is no surprise that China wants Unocal. The country is thirsty for energy to fuel its booming economy. China is already the world's second-largest oil importer, after America. More even than oil, China wants gas, of which Unocal has lots, but which currently accounts for only 3% of China's energy use.
To correct that imbalance, CNOOC's state-owned, unlisted parent company—which still owns 70.6% of the listed CNOOC—is building up to ten giant liquefied-natural-gas terminals along China's east coast. All that it needs now is the gas. Three-quarters of Unocal's gas reserves (and a quarter of its oil) are in Asia (mostly Indonesia, Thailand and Bangladesh) and may be double previous estimates. This, and the American firm's expertise in deep-water oil-drilling, is what CNOOC, or rather China, wants. Price, therefore, does not matter much. Chevron may raise the stakes by upping its bid, but, ultimately, “if the People's Republic of China wishes to acquire Unocal, it will,” says David Hurd of Deutsche Bank in Hong Kong.
Mr Fu is caught between two imperatives. On the one hand, he is a western-trained manager fighting for the interests of all shareholders. On the other, he is president of CNOOC's state-owned parent and ultimately beholden to Beijing. Pulling off the deal would bring huge political influence and secure his future.
Caught between yin and yang
Hence CNOOC's initial ambivalence towards Unocal. After a tentative first approach last December, the Chinese company almost bid this April, only for Mr Fu to pull back in deference to the concerns of his non-executives. The independent directors then hired their own team of advisers, led by N.M. Rothschild, an investment bank, to judge whether a bid was in the interest of all of the firm's shareholders. Mr Fu insists that it is: “China needs gas. Unocal will allow us to sell more gas to China and grow our company for shareholders.” He plays down the political risks, saying that Unocal's production is equal to less than 1% of American consumption and that, unlike Chevron, CNOOC will preserve local jobs. To maintain financial prudence—Mr Fu's mantra in the past—CNOOC's parent will provide $7 billion in cash, easing the strain of the bid on the listed firm's balance sheet.
While the parent's role raises doubts about the deal's commercial logic, it should protect CNOOC's minority investors. The bulk of the transaction will take place through the listed firm, not (as is common practice in China) its opaque, unaccountable parent. “If our parent buys Unocal, America will think the Chinese government wants it,” says Mr Fu. But “this transparent, commercial way, based on international practice, should be less sensitive for the US government.” Will that really reassure American politicians, given that CNOOC is state-controlled? Mr Fu says that, although his firm is like a state company in ownership, “in management and operations we are commercial.” Perhaps. But with oil and gas prices at record levels, Mr Hu's expensive deal puts the extent to which CNOOC is really a commercially driven firm, with corporate governance able to protect all its shareholders from Chinese political pressure, to the severest of tests.
And a pretty good article on what has America achieved with its teenagish reaction:
China bashing
Giving China a bloody nose
Aug 4th 2005 | HONG KONG AND NEW YORK
From The Economist print edition
By sabotaging a Chinese bid, America has damaged its own interests
WHAT started out as a firecracker—China's biggest, boldest foreign takeover attempt, and a contested one to boot—this week fizzled out as a damp squib. On August 2nd, the China National Offshore Oil Corporation (CNOOC), a huge, partially state-owned firm, meekly withdrew its $18.5 billion bid for California's Unocal, scared off by what it calls “unprecedented political opposition” on Capitol Hill. On August 10th Unocal shareholders are now almost certain to accept a lower $17.6 billion offer from a domestic rival, Chevron.
CNOOC emerges from this episode with question marks over its credibility. It bears no fault for the fact that it became a lightning rod for all the issues that now enrage American politicians about China—from its “undervalued” currency and trade surplus with America to its supposed destruction of American jobs and poor human-rights record. It can fairly cast itself as a victim and turn to hunting other, less costly and politically sensitive, oil and gas assets. Relieved investors reacted to the news by sending CNOOC's shares higher.
Even so, CNOOC made some costly tactical errors and lost the lobbying battle in Congress, despite hiring sophisticated advisers. It could have quickly arranged to sell on Unocal's American assets (some 30% of its turnover) to counter claims that the deal threatened American “energy security”. After all, CNOOC was mostly after Unocal's Asian gas reserves.
More critically, having dithered initially—it had the chance to buy Unocal in April, before Chevron entered the fray—CNOOC might have helped its cause by raising its bid by another $500m or so late last month to counter an increased offer from Chevron. That would have maintained a 10% or so price differential in its favour, probably enough to compensate Unocal's shareholders for the risk of the bid being blocked by politicians and thereby increasing its chances of winning the endorsement of the Unocal board. CNOOC now concedes that “life might have been very different” if it had gone for a killer bid, but says that it decided not to do so in the interests of its own shareholders.
China crisis?
While CNOOC's bid is the most high-profile failure, it is only the latest in a string of misses by Chinese firms trying to buy overseas. Last month white goods group Haier pulled out of its quest to acquire America's Maytag after a bigger American rival, Whirlpool, countered. China Mobile was outbid for Pakistan Telecom by a competitor from the United Arab Emirates. And China Minmetals failed in its $7 billion offer for Canada's Noranda. Forecasts that Chinese firms are about to buy up the world, the stuff of headlines only weeks ago, now look as naïve as the firms and their inexperienced bosses themselves.
The most worrying aspect of the CNOOC episode, however, is what it says about America. The anti-China hysteria in Washington, DC, the cowardly silence of the pro-China business lobby and the blatant disregard for fair play and open markets is deeply disturbing. A second-rank oil firm such as Unocal is not worth such a sacrifice of principles. Blocking CNOOC has not meaningfully increased America's energy security. But it may have damaged American business interests, in China and elsewhere. How could America now credibly complain about, say, French attempts to prevent PepsiCo taking over Danone? Beijing will no doubt use this incident to deflect American pressure to pursue reform in other areas. American politicians, so fond of seizing the moral high ground, have ceded it to, of all people, the Chinese.
It seems unlikely that CNOOC will now sulk at home just because its plan to buy Unocal has been thwarted. It has significant unused spending power. While a bid for another big American firm would be daft, there are other options. People close to CNOOC say that it has its eye on Woodside, an Australian firm with desirable gas and oil assets. Such a deal might encounter nationalist resistance in Australia too, but it would be a good fit given CNOOC's need for lots of liquefied natural gas.
If CNOOC does buy a small to middling independent energy firm, it would merely be doing what plenty of western rivals have done of late: gobbling up oil and gas assets in a desperate bid to replenish reserves. Some $63 billion in mergers and acquisitions have been announced already in the oil and gas business this year, nearly as much as in all of 2004.
But one danger is that, feeling shunned by America and nervous of a similar reaction elsewhere, the Chinese may decide to vigorously pursue less savoury options for getting oil and gas. Unlike America and Europe, China does not preach about human rights and democracy to thuggish dictators. On the contrary, China has happily struck deals with countries, such as Myanmar and Sudan, which face American sanctions or international disapproval. It is also rumoured that China has offered arms and other sensitive defence technology in return for oil and gas rights in certain countries, a trade that may seem even more attractive now that America has blocked open-market purchases.
But if China does pursue oil and gas through such “oil diplomacy”, the Western-educated, Wall Street-minded men running CNOOC are unlikely to be in the vanguard. A few weeks ago, the government folded the assets of the China National Petroleum Corporation (CNPC) and its listed affiliate, PetroChina, into a new, as yet unnamed firm. This new entity's express purpose is to be a “platform for international business development” and to “establish significant overseas operations.” A glance at the forays overseas so far by Chinese energy companies reveals that CNPC/PetroChina is far and away the leader in both the number of deals done and in the value of those deals. Petroleum Intelligence Weekly, a trade journal, puts it well: this new company “could become the acquisition vehicle to watch”.
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Nick-la
Wonder Wit
Joined: July 19, 2003
Posts: 3675
Location: Wasted on this site
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Oct 12, 2005 - 08:05 PM |
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Well you were wrong about the board members, what else could you be wrong about?
The fact that Chinaski was in fact wrong has shaken my entire belief system and left me confused.
I dont think i matters who 'should' have that oil. It will matter who gets it in the end. And if it's after war (which this one won't be) and innocent people die, it's their fault. If chinese people die then it's their fault as they will have been probably wanting war in the first place. As they would be told to want war. SO who cares in the end. At least my humble opinion. Should be interesting when/if US boats get there.
Interesting how everything from the economist (one source) is reliable, factual and unbiased. Isn't it???????????????? Interesting. |
_________________
I'm surrounded by idiots. |
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Henry_Chinaski
Board Lord
Joined: Aug 16, 2003
Posts: 5025
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Oct 12, 2005 - 08:49 PM |
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Kiddo you assume that I say I am not biased. Or that I said The Economist is not biased. Who said that? Can you point exactly which post I said that? No?
Well.
The Economist is as biased as any source.
I just quoted the publication I read. If I just read The Sun, probably I would quote it instead. |
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