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China stocks up on bargain oil
China is forging ahead with an overseas spending splurge, snapping up resources especially oil at bargain prices and strengthening its long-term prospects for growth before Western economies can bounce back.A series of high-profile energy deals and mining bids in the past month marked an end to the nervousness that appeared to impinge on Communist Party leaders at the outset of the global financial crisis. Attention has turned from hoarding foreign exchange reserves worth close to $2 trillion to locking up future supplies. Oil has emerged at the top of China's shopping list. In February, China secured oil supply deals totaling $41 billion with Russia, Brazil and Venezuela. Among the most lucrative: an agreement reached with Russia, in which China will lend $25 billion to Russian oil giant Rosneft and oil pipeline company Transneft. In return, according to Russian news reports, China will receive 300,000 barrels of crude a day for the next 20 years at a rate of about $20 a barrel less than half the current price of $45. While touring Latin America, Vice President Xi Jinping signed a deal to lend $10 billion to Brazil's state-owned oil company Petrobras. China will receive up to 160,000 barrels a day, again over a 20-year period. A subsequent announcement from China's National Energy Administration further clarified Beijing's intentions. China is considering setting up a fund for China's three state-owned energy giants PetroChina, Sinopec and the China National Offshore Oil Corp. (CNOOC) to purchase oil and gas companies overseas. The firms will benefit from low-interest loans and direct capital injections, the announcement said. The oil deals complement efforts to buy into the Australian mining industry. China's biggest aluminum producer, Chinalco, has submitted a bid of $19.5 billion to buy an 18 percent stake in beleaguered mining company Rio Tinto. Chinese firm Minmetals has offered $1.7 billion for Oz Minerals. China also is seeking diversification of its foreign exchange reserves, now heavily in dollars. The head of China's energy bureau, Zhang Guobao, said earlier this week that China should accumulate more gold and uranium as well as other strategic commodities. Posted by: ed 2009-03-12 |
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