China National Petroleum Corp., parent of the world’s biggest company by market value, received a $30 billion loan to fund overseas expansion as the country’s government stepped up its hunt for energy resources.
The five-year loan will be provided at a discounted interest rate by China Development Bank under an agreement signed yesterday, PetroChina Co.’s parent said in a statement on its Web site today, without giving details.
The accord underscores China’s strategy to accelerate acquisitions of energy resources abroad after spending $12 billion this year on oil fields and refining assets in countries including Singapore and Canada. The world’s third-biggest economy is taking advantage of lower valuations to build oil reserves and ensure future supplies after demand doubled in the last decade.
“This reflects China’s intensifying desire to beef up long-term national energy security,” Gordon Kwan, the head of regional energy research at Mirae Asset Securities Ltd. in Hong Kong, said in an e-mailed note. The nation is “exploiting depressed oil prices while diversifying away from holding too much U.S. dollar bonds,” he said.
Oil prices in New York have fallen about 51 percent from a record $147.27 a barrel reached last year. China is the world’s largest foreign holder of U.S. treasury bills. The country’s U.S. government debt holdings stood at $776.4 billion as of June 30.
Potential Repsol Bid
China National, also known as CNPC, had proposed offering $13 billion to $14.5 billion for a controlling stake in Repsol YPF SA’s Argentine unit, three people familiar with the matter said in July. The transaction would be China’s largest overseas takeover.
The oil producer may need to issue corporate bonds or borrow from banks to finance the deal, according to Wang Jing, chief oil analyst with Orient Securities Ltd. The company’s cash isn’t sufficient because it may still need funds to maintain its day-to-day operations, she said.
CNPC had cash-on-hand of about 185.8 billion yuan as of the end of last year, according to the Beijing-based company’s annual report.
China’s oil consumption doubled in the last decade to 8 million barrels a day in 2008, according to BP Plc’s Statistical Review. It imported about 3.6 million barrels of oil a day last year, meeting about 45 percent of its needs.
China will boost output from fields abroad to more than 100 million metric tons by 2010, accounting for more than a quarter of the nation’s total, CNPC said in a report published in its newsletter yesterday.
“The credit agreement is of great importance for CNPC to speed up its overseas expansion strategy and secure the nation’s energy supplies,” President Jiang Jiemin said in the statement.
Today’s loan is equivalent to PetroChina’s 2009 capital expenditure budget of 200 billion yuan, said Kwan at Mirae. While the statement didn’t give details on the discounted rate, Chinese banks’ benchmark interest rate for yuan-denominated loans over five-years is about 5.94 percent.
China’s quest for resources had been met with opposition overseas. U.S. lawmakers helped block Cnooc Ltd.’s $18.5 billion bid for Unocal Corp. in 2005 while Haier Group Corp. lost out in the race to acquire U.S. appliance maker Maytag Corp. in the same year. Melbourne-based Rio Tinto Group, the world’s third- largest mining company, abandoned a tie-up with Aluminum Corp. of China, or Chinalco, in June amid protests by Australian politicians.
Yesterday, Verenex Energy Inc. said it’s in talks on a possible sale to a Libyan fund after the North African nation blocked its deal with CNPC.
China remained unfazed by the failures as the government’s 4 trillion yuan economic stimulus package spurs demand.
China’s latest takeovers include PetroChina’s C$1.9 billion ($1.7 billion) agreement this month to buy 60 percent stakes in Athabasca Oil Sands Corp.’s MacKay River and Dover oil-sands projects. PetroChina agreed in May to buy Singapore Petroleum Co., the city’s only listed refinery, for $2.2 billion.