Language Sites
  • UCAN China
  • UCAN India
  • UCAN Indonesia
  • UCAN Vietnam

As world scrambles for energy, China heads for Brazil

Major stake in giant offshore oil field bought at auction

As world scrambles for energy, China heads for Brazil

Brazilian oil industry workers were against the auction which netted China a large stake in the Libra oil field. (Picture: Nelson Almeida/AFP)

AFP, Shanghai

October 22, 2013

Mail This Article
(For more than one recipient, type addresses separated by commas)

China's global hunt for crucial energy supplies is taking it into America's backyard, with two Chinese state firms winning production rights to a multi-billion-barrel deepwater oilfield off Brazil.

China National Petroleum Corp. (CNPC) and China National Offshore Oil Corp.(CNOOC) each took a 10 percent stake in Brazil's "Libra" field, alongside three other companies, at an auction on Monday.

Beijing is seeking oil, natural gas and other raw materials to keep the world's second largest economy moving and the government has is encouraging companies to "go out" and make acquisitions to gain both market access and international experience.

"Everyone is scrambling for resources worldwide," said Li Li, an analyst at consultancy C1 Energy.

"The whole of South America is relatively less developed with both abundant reserves and these kind of resources, so Chinese companies are more interested," she said.

China is already the biggest energy user in the world and the Organization of Petroleum Exporting Countries (OPEC) says it could also surpass the United States as the largest oil importer by 2014.

The chief executive of CNOOC, China's main offshore oil producer, said the latest deal will allow entry to an "ultra" deepwater field.

"It also aligns with our philosophy of seeking partnerships to expand our global footprints," Li Fanrong said in a statement.

CNOOC's traditional territory has been the South China Sea and East China Sea but last year it bought Canada's Nexen in a $15 billion deal despite some Canadian political opposition.

Less than two months ago, another Chinese state firm, Sinopec, bought a $3.1 billion stake in an existing oil and gas operation in Egypt -- despite political strife in that country.

The Libra auction drew several participants but no US firms, who saw too many strings attached, including major Brazilian government intervention through its Petrobras company.

Li Li played down the geographical proximity of the Libra field to the US, but acknowledged there was competition for energy resources.

"Chinese firms have a late start, so they must seek new assets which are harder to evaluate," she said.

Petrobras took a 40 percent stake in the field, while Anglo-Dutch giant Royal Dutch Shell and France's Total each grabbed 20 percent.

China already does significant business with Brazil, being a major buyer of its soybeans to feed its more than 1.3 billion strong population.

The two countries recorded $85.72 billion in bilateral trade last year, up 1.8 percent on 2011, making Brazil China's 10th-biggest trade partner.

For CNPC, China's largest oil and gas producer, the Libra deal comes at a time when the group and its listed unit are targets of a government probe into corruption -- which they claim has not affected operations.

A former CNPC chairman, Jiang Jiemin, is under investigation and has been removed as director of China's supervisory body for state-owned firms, state media said last month.

Four other executives of CNPC or subsidiary PetroChina are also under investigation, the companies and state media have said.

Stock investors were little moved by the Brazil venture. In Hong Kong trade CNOOC shares fell 0.63 percent, while PetroChina edged up 0.66 percent. However, Shanghai-listed shares of PetroChina fell 0.51 percent. AFP

UCAN needs your support to continue our independent journalism
Access to UCAN stories is completely free of charge - however it costs a significant amount of money to provide our unique content. UCAN relies almost entirely on donations from our readers and donor organizations that support our mission. If you are a regular reader and are able to support us financially, please consider making a donation. Click here to donate now.