By Clara Ferreira-Marques
(The author is a Reuters Breakingviews columnist.)
SINGAPORE, Dec 7 (Reuters Breakingviews) - Beijing wants a seat at the oil-trading table. State firms like Chinaoil have had limited impact. Privately owned CEFC has the supply deals, financial backing and apparent political clout to become a more nimble, independent contender. It could yet challenge Vitol and other market leaders.
Shanghai-based CEFC, following the big boys' playbook, is now growing by striking bold deals. Most recently it agreed to take a 14 percent stake in Rosneft, the sanctions-hit Russian group. Thanks to that deal, in 2018 CEFC will get 12 million tonnes of crude, or more than 240,000 barrels per day.
That is still a fraction of what rivals play with: in 2016, Vitol shifted more than 7 million bpd of oil and products. However, CEFC is growing fast. As well as doing deals with Rosneft and in Abu Dhabi, it is eyeing investments in petrochemicals and natural gas.
It helps that it has abundant funding. Russia's VTB will probably help fund the Rosneft deal, and Reuters has reported that this loan could be refinanced by China Development Bank, a policy lender. But to go further, CEFC will have to do better than rivals Unipec and Chinaoil. The duo, respectively part of Sinopec and PetroChina, have been slow to transform into sophisticated players with international trading desks. It may also have to be more transparent about ownership and control if it wants to expand in developed markets. It will also have to make a profit, and not just exert the influence Beijing craves.
Beijing has reasons to favour an emergent local champion. It frets about energy security and would like more sway across the oil supply chain. CEFC might be prevailed upon to undercut foreign traders, helping cut costs for local importers. An independent Chinese player will also give it more visibility into the workings of the oil market. And more profits could flow to China rather than to industry royalty. Eventually.
- CEFC China Energy said on Sept. 8 that it would buy a 14.2 percent stake in Russian oil major Rosneft for $9.1 billion from a consortium of Glencore and the Qatar Investment Authority. The deal was one of the largest investments ever made by China into Russia.
- In an extension of the September agreement, on Nov. 20 Rosneft said it agreed to supply up to 60.8 million tonnes of oil over the five years starting from Jan. 1, 2018. The deal makes CEFC one of the top 10 oil merchants in the world.
- On Feb. 20, Abu Dhabi awarded a 4 percent stake in its giant onshore oil concession to CEFC for $900 million. The onshore fields, operated by Abu Dhabi Company for Onshore Petroleum Operations (ADCO), have total resources estimated between 20 billion and 30 billion barrels of oil-equivalent.
- CEFC wants to launch its own bank early next year, two company executives told Reuters in November.