Wall Street Journal
Friday, 11 June 2010
Can China Come To BP's Rescue?
Purchase by PetroChina Makes Sense Financially, But Politics Are a Killer
By MICHAEL CORKERY
While it is difficult to know what the Obama administration believes will be the
end game for BP, it is pretty clear it isn't this: A takeover by PetroChina, a deal
that would give the Chinese oil giant a huge hold on the world's energy supplies.
And yet analysts at Standard Chartered Bank were making waves Thursday with
a report that floated the idea of a PetroChina-BP merger. PetroChina, which has
a $60 billion warchest for international investments, is seeking to tap into
overseas reserves to feed China's insatiable thirst for oil.
China accounts for about 11% of the world's oil demand. An acquisition of BP
would give PetroChina access to 18 billion barrels of oil reserves around the
world—a huge boost to its overseas supplies.
Standard Chartered said in its report that there were "persuasive economics"
involved in the deal, although the chances of it actually happening were slim.
That skepticism, of course, is grounded in the fact that U.S. regulators aren't
likely to look kindly at a Chinese oil company becoming the largest offshore oil
producer in the Gulf of Mexico.
Politically, a PetroChina-BP deal would about as easy to digest as the tar balls
washing up on Louisiana beaches. Remember what happened when Cnooc tried
to buy California's Unocal for $18.5 billion in 2005? Back then, U.S. politicians
worried about Chinese influence on world energy supplies, and nationalistic
sentiments have only gotten stronger amid today's difficult economy.
Also, U.K. retirees, who own many BP shares through their pension funds, are
unlikely to rejoice about having new Chinese owners. That likely pushback would
mean any deal would need to be for cash only.
Earlier this week, Royal Dutch Shell and Exxon Mobil were being mentioned as
possible suitors for badly battered BP, which is facing questions about its ability
to survive the fallout from the spill.
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Through Wednesday, it had lost more than half of its market value, shedding $82
billion since the spill began nearly two months ago.
BP's American depositary shares were up 12% at 4 p.m. in New York Stock
Exchange trading Thursday, at $32.78, after falling nearly 16% Wednesday.
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