WASHINGTON (MarketWatch) — Chinese and Indian companies aren’t overpaying for oil resources, an expert said Friday in countering claims that the emerging Asian nations’ foreign acquisitions endanger domestic energy security.
Robert Weiner, a professor of international economics and international affairs at George Washington University, said at an event held by the Asia Society and the Sigur Center for Asian Studies that his research shows that companies like China’s Sinopec and India’s Reliance Industries are paying similar prices to what Western firms have paid.
China is currently the second-largest consumer of oil worldwide after the United States, and India ranks fourth, according to the U.S. Energy Information Administration.
“To me, buying up the world oil means buying assets such as oil fields or oil companies at non-commercial prices,” Weiner said. “[But] Chinese companies are going around buying oil at commercial terms; they’re not doing anything different.”
Weiner analyzed oil reserve acquisitions made worldwide from 2000 to 2009, and analyzed prices paid for those acquisitions. In the research, Canada, U.S., the U.K. and Australia ranked in the top four for having the most number of acquisitions worldwide, while China came fifth. He concluded that there are no differences in acquisition prices paid among the various groups – resource-rich or resource-poor nations.
He added that only a small portion of the oil that Chinese companies buy abroad actually gets shipped back to China. Essentially, there is little evidence to support that a firm’s foreign investment behavior is based on nationalistic grounds, he said.
CNOOC’s $18.5 billion bid for Unocal in 2005 was withdrawn after the Chinese firm encountered U.S. political opposition to the bid.
“The bottom line is: how do you go about analyzing claims like, companies are taking over the world?” Weiner said. “With economic competition from a new source, anxiety is a typical reaction.”