Sunday, November 2, 2008

Crisis seen offering opportunities for China resource firms

Western thirst for cash amid the global financial crisis is opening a door for Chinese companies, especially in the energy and mining sectors, to access deals they might not have otherwise been able to tap, industry experts said on Wednesday.

The world's fourth-largest economy has long been scouring the globe for natural resources such as oil and metals, to sustain its growth.

Its efforts have often met resistance, as demonstrated by the failure of state oil firm CNOOC Ltd's bid for U.S. oil producer Unocal in 2005, due to political obstacles in the U.S.

"What will change the dynamic is the fact that there are a lot of companies in the mining sector, particularly in Australia, who have not developed their projects and have no ability to access cash," said Tim Goldsmith, the global leader of mining at PricewaterhouseCoopers, based in Melbourne.

He and other industry experts at a conference in Beijing said that Chinese firms should jump at such chances. And with more deals done, Western firms also might understand Chinese policies and culture better, which could make future talks easier.

Charles Li, China chairman of JPMorgan, said China should let its firms, not the sovereign wealth fund, be the main vehicle for securing resources abroad.

The appetite among companies for such ventures was rising, after several successful deals earlier this year, the experts said.

"They used to create a lot of obstacles for us. But now, it's better to be taken over by Chinese firms than to be bankrupt," said Han Xiaoping, senior vice president of energy consultancy Beijing Falcon Power Ltd.

The country's largest offshore oil services group, China Oilfield Services Ltd, bought Norwegian peer Awilco Offshore in July, which expanded its operations in Europe and Asia and also gave it access to international management expertise and technology.

Less than three months later, Australia gave approval for Sinosteel to buy up to 49.9 percent in iron ore prospector Murchison Metals Ltd, after China's largest metals trader had taken over rival prospector Midwest Ltd earlier in the year.

The financial tsunami that has swept through the United States, Europe and other major economies has driven down oil and metal prices as demand weakens due to slowing global growth.

"We are indeed embracing great opportunities now," Han said.

However, some obstacles still remain.

Chen Weidong, executive vice president of China Oilfield Services, said Chinese firms usually ended up paying higher prices than U.S. rivals, due to complicated domestic approval systems.

"This is the hardest part, not the price," he said of his firm's negotiations with Awilco earlier in the year.

"But with more and more firms going abroad, we should be able to cut these costs."