THE NEXT TIME you fill up your car in Bukit Timah, it could be at a PetroChina Co outlet. While the Chinese oil giant has yet to make up its mind about rebranding the petrol stations it owns in Singapore, it is more likely than not bringing its bright orange logo to the island state. Just last month, PetroChina acquired a 45.5% controlling stake in Singapore Petroleum Co (SPC) from Keppel Corp for $1.47 billion. PetroChina is now seeking to buy the rest of SPC through a mandatory general offer. The entire deal could cost the Chinese oil giant over $3.23 billion.

 

Chinese oil majors are now ready to bite off more even as they chew on SPC’s petrol stations in Singapore. It turns out that the SPC deal just whetted China’s voracious appetite for global resources, even if you allow for the fact that SPC’s real forte is oil refining, trading and distribution. Its fledgling production and exploration unit has always been seen as more of an afterthought than a real growth driver, even though it owns stakes in oil fields in Indonesia, Australia, Vietnam and Cambodia.

 

Earlier last week, Beijing’s No 2 oil firm, China Petrochemical Corp, or Sinopec as the group is popularly known, announced it was buying Toronto-listed oil exploration and production firm Addax Petroleum Corp for a whopping US$7.2 billion ($10.7 billion). This is China’s fourth oil-and-gas-related purchase in six months. The country’s bill on its oil-linked shopping spree since December is already over US$13 billion and likely to top US$15 billion if all the SPC minority shareholders tender their shares.

 

Addax who? The obscure little firm actually owns vast oil reserves in Iraq’s Kurdistan, as well as Nigeria. Indeed, it was only a few months ago that Iraq allowed foreign companies developing oil fields in the Kurdish region to export their crude directly. Addax was a major beneficiary of that move, and just three weeks after the first barrel of oil was shipped out from Kurdistan, Sinopec moved in with an audacious bid.

 

The deal is China’s biggest overseas oil-related acquisition so far. Two years ago, PetroChina acquired control of Petro Kazakhstan for US$4.2 billion. Chinese oil firms have also done oil-and-gas deals in central Asia as well as taken stakes in smaller energy- related ventures in Indonesia and Africa in recent months. Late last year, Sinopec paid US$1.9 billion for control of Tanganyika Oil, a Canadian firm that has production-sharing agreements in Syria.

 

China’s cash-rich oil firms, development banks and state investment firms are on a buying binge, cashing in on lower oil prices and tight credit markets to grab assets to help feed its growing appetite for energy. Over the last four years, it has bought stakes in a pipeline in Russia, crude deposits off the Brazilian coast and production wells in Libya. While they may be eager to do deals and are hungry for resources, these firms aren’t overpaying. Sinopec is buying Addax’s reserves at an average cost of just over US$16 a barrel. If you are betting that oil will eventually climb to US$100 a barrel when global recovery gets underway, the Addax purchase looks like a steal.

 

The Addax and SPC buys come as yet another Beijing-based oil firm, China National Offshore Oil Corp (better known as CNOOC), is reportedly negotiating to buy Texas-based Kosmos Energy, which has interests in West Africa.

 

In 2005, China’s oil deals were stillborn after an US$18.5 billion bid by CNOOC for US-oil giant Unocal ran out of gas due to unprecedented nationalistic and political opposition in the US as well as some missteps by CNOOC itself. But, Chinese oil firms have learnt from the Unocal debacle and are moving more cautiously, targeting smaller, more strategic assets and stakes in ventures rather than the outright takeover of large, highprofile companies.

 

To be sure, China needs an awful lot of oil. Already, it consumes close to 8.2 million barrels a day. That’s nearly double the 4.2 million barrels it consumed just a decade ago. Some of the more aggressive forecasts have put China’s consumption at 15 million barrels per day by 2020, even as it pushes towards more energy efficiency and seeks alternative fuels to power its growth. China already imports about half of its oil needs, and as its consumption grows, it is scurrying to secure more oil for its future needs. Little wonder then that energy security is a key national priority for China.

 

China’s race for oil assets is part of its bigger drive to acquire resources and technology with its vast and growing foreign exchange reserves, as it seeks to move to the next level of development. Aside from oil and resources, China has identified key technologies that it wants to acquire, by buying Western companies, in automobile, steel, machinery and shipbuilding industries to give it the core platform it needs to build an industrial power base.

 

In a way, China has learnt from the mistakes made by Japan in the 1980s and, to an extent, by South Korea in the 1990s. Remember the way the Japanese targeted trophy assets like gleaming skyscrapers in New York or how South Korean companies made a mad rush to grab market share by buying any company they could get hold of? China will have none of that.

 

With its huge domestic market, Chinese firms don’t need to pay through their nose to buy market share, and they would rather build their own skyscrapers in Shanghai Pudong than buy ageing ones in Manhattan. Moreover, China sees itself as a potential global power, unlike Japan or South Korea. Strategic purchases from Africa and Central Asia to Latin America, and bright logos of its emerging giants emblazoned from Singapore to Sao Paulo, are just baby steps in its long march towards that goal.