Word: stakes
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...which buys all its crude on the open market and is therefore exposed to sharp price rises. The way to do that is to invest in exploration and development in countries that have oil fields but lack the capital or technology to exploit them. When Chinese companies have a stake in oil coming out of the ground, even if it originates abroad, they will have secured long-term supplies independent of the world's fickle prices. The process of overseas exploration began in 1997, when Premier Li Peng encouraged state-run oil concerns to look for investment opportunities outside China...
China's stepped-up efforts have already created some friction. Earlier this year ONGC Videsh, the overseas-investment arm of India's largest oil and gas producer, was on the verge of completing a deal for an 11% stake in a proven oil field in Sudan when China's CNPC swooped in with an offer reportedly 17% higher--and snatched the deal away. "The Chinese are definitely very aggressive in the price they are willing to pay," says R.S. Butola, managing director of ONGC Videsh. Beijing has demonstrated that it is willing to face down international pressure to protect...
...last Wednesday of September, Russia's second largest oil company, Lukoil, hoisted the Stars and Stripes up a flagpole outside its Moscow headquarters to celebrate a landmark deal: with a $2 billion bid, the U.S. firm ConocoPhillips had just won an auction for the Russian government's 7.6% stake in the firm. The two companies promptly announced a strategic alliance to develop oil reserves in the Russian Arctic and potentially work together in Iraq. For Jim Mulva, Conoco's president and chief executive, the deal amounted to a coup, giving Conoco access to 8 billion bbl. of proven oil reserves...
...companies are piling in. In addition to the Conoco deal, Britain's BP is investing a whopping $7 billion in a joint venture that controls huge fields in western Siberia, and in September France's Total agreed to pay $1 billion for a 25% stake in Novatek, Russia's largest private gas producer. Many other companies, including ChevronTexaco, PetroCanada and Norway's Statoil, are trying to get a foothold. All three recently signed preliminary agreements to work with state-controlled Gazprom, an oil-and-gas behemoth in which Germany power company E.On holds a 6% stake. There is widespread speculation...
...doesn't mean the central government wants to nationalize all energy assets, but it has put an end to generous tax breaks and has introduced other limitations on the private sector, particularly foreign companies. Under the terms of the Conoco deal, for example, the American company can raise its stake in Lukoil--but only to a ceiling of 20%. That's less than the 25% it needs to be able to block strategic company decisions. BP, by contrast, whose contract was signed eight months before Khodorkovsky's arrest, has a 50% share in its Russian joint venture. (The company...