18 April 2019

Oil majors press overseas forays amid rising yuan

There’s more to the renminbi than being a world reserve currency of the future. In the global energy market, the future is here and now.

Thanks to the renminbi’s strength, state-owned behemoths Sinopec (00386.HK, 600028.CN), CNOOC (00883.HK) and China National Petroleum Corp. have been snapping up large chunks of the globe in search of energy.

The new front is Brazil, where the three are competing with eight other players for Libra Oilfield which goes up for grabs this month.   

Libra Oilfield, which would be the world’s largest deepwater oil field put up for auction, has about eight billion to 12 billion barrels of high-quality petroleum, equivalent to 80 percent of Brazil’s crude oil reserves.

Even as it keeps an eye on the Brazilian prize, Sinopec is hard at work on another target: Spanish natural gas utilities company Gas Natural, whose major shareholders include oil major Repsol.

Repsol is selling one-quarter of its 30 percent stake in Gas Natural, but Sinopec’s interest in a potential acquisition may be less to do with getting a foothold in Spain than creating an opening in resources-rich Brazil where Repsol controls a wide range of energy assets. That would fit in with Sinopec’s long-term strategy.    

Sinopec and Repsol have been partners in the Brazilian oilfield business since 2010. Still, Sinopec faces a formidable competitor for Gas Natural in Singapore sovereign wealth fund Temasek which owns 6.3 percent of Repsol after raising its stake in the company earlier this year.

If Sinopec prevails, it will not be the first time the company will add a major asset to its global portfolio. In November 2012, it agreed to pay French giant Total S.A. US$2.5 billion for a 20 per cent stake in an offshore Nigerian field. In February, it announced plans to acquire the Nigerian assets of Britain’s gas exploration company Afren for US$1 billion.

Sinopec’s acquisitive gears are being greased with a currency that has held up well against upheavals in the world economy and China’s own economic challenges.   

The yuan has gained 7.8 percent against the US dollar since 2011. It traded at 6.1204 on Thursday.

“With a strong yuan, it’s good timing for the energy companies to expand overseas,” said Lin Boqiang, director of the China Center for Energy Economics Research in Xiamen University.

– Contact the writer at [email protected]




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