Cape Town - Although the rise of Chinese state oil companies
offshore is impressive, they are neither almighty nor all-knowing, and offer
local companies opportunities to partner in business with the Chinese in
Africa.
Adi Karev, audit group Deloitte's global leader for the oil
and gas industry, said that one cannot work in the oil industry today without
noting where, with what, with whom and how long the Chinese have been doing
business on the continent.
The Chinese involvement in the African oil industry is
dominated by four state oil companies. They are able to buy anything they want
because they have financial support from the Chinese government. They do
however have weaknesses and do not necessarily know how to operate their
acquired assets efficiently, said Karev.
At a breakfast function held by Deloitte and the South
African Oil and Gas Alliance - a body wishing to promote South Africa as a
service centre for the growing African oil industry - Karev said while Western
companies are driven by the profit motive, Chinese state oil companies' driving
force derives from their obligation to execute the precepts of the Chinese
government's five-year economic plan.
China started its 12th five-year plan this year. The plan
prescribes to the Chinese state oil companies what they have to do, but not how
or where they have to do it.
Karev, who is based in Hong Kong, explains that if he asks
his friends in the Chinese oil companies why they make a certain strategic
move, they reply: "Because it's in the five-year plan."
In the 11th five-year plan Chinese oil companies were, for
instance, asked to buy up foreign oil assets and Chinese motor companies were
ordered to learn more about Western technology. One of the largest Chinese
banks bought the retail division of one of America's bankrupt banks to learn
how Western retail banking works and bring these lessons back to China.
The 12th five-year plan gives Chinese companies offshore specific instructions to balance their economic growth targets with sustainability and social responsibility.
Chief executives of state oil companies are political
appointments. Before such appointments they first have to attend a six-month
course with the Communist Party, and it is a precondition that a chief
executive should have a good reputation as a party member.
Karev said the offices of the Chinese oil companies CNOOC,
Sinopec and CNPC are collectively situated at a Beijing crossroads. The
government recently decided to move CNOOC chief executive to Sinopec, and
CNPC's chief executive was transferred to CNPC. Karev said CNOOC focuses on
deep-sea exploration while Sinopec concentrates more on refining and fuel
distribution. Over the next five years he expects Sinopec to conclude more
transactions in the exploration and development sector because its new chief
executive brings relevant experience from CNOOC. The strength of the former
head of CNPC was, in turn, the boosting of operating efficiency, and Karev
expects that to become the new focal point at CNOOC as the CNPC boss moves in
there.
According to Karev, Chinese companies seldom have uniform
international standards. They keep to the standards of the assets they acquire.
If a foreign company is taken over the Chinese will rarely effect drastic
changes. If a Chinese chief executive is appointed, he will first attempt to
learn by observing. China has a dearth of business leaders with global
experience. Top Chinese managers who wish to work overseas will not take their
family along, or take a holiday. "While you as a Westerner take your leave,
the Chinese will rather return to Beijing and carry on working."
Karev reckons that, until China has sufficient business
leaders with foreign experience, its companies will struggle to integrate fully
with local companies.
Another aspect of the new five-year plan is the charge that
Chinese companies must learn how global financial markets work, the better to
exploit them for capital requirements.
China also realises that it will have to work hard to change
its image of being merely a low-cost manufacturer.
According to Karev, China has a challenge to persuade its consumers that its own products are of better quality than foreign imports. Chinese motorists still prefer foreign models to their own, which represent only 5% of the domestic Chinese automobile market.
- Sake24
For more business news in Afrikaans, go to Sake24.com.