Essay about Chinese Overseas Mergers and Aquisitions in Natural Resources

Essay about Chinese Overseas Mergers and Aquisitions in Natural Resources

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Recent years, natural resource is always the hot sector for M&A, especially for those predominant state-owned enterprises that represent national will. Therefore, these M&As in natural resources are not the pure commercial operations and causes of them will be categorized into two levels, enterprise and country.
First, let’s focus on the causes of enterprises and it is easily found that M&A is able to provide them with an access to wider resource market and advanced exploit technology. No matter in case of China National Petroleum Corporation acquiring PetroKazkahstan in 2005 or China National Offshore Oil Corporation Limited (CNOCC Limited) merging Nexen in 2013, the latter ones either possess larger overseas marker like Kazakhstan or more diverse business and technology like Nexen’s oil sand exploitation technology. (Appendix 1) These M&As will facilitate the expansion and internationalization of Chinese enterprise in terms of market and technology. However, this is not the core cause of energy M&A, since enterprises involving in the business are almost all nation-owned and natural resource is more a strategic material than usual traded commodity for companies.
Therefore, let’s mainly concentrate on the causes at national level. This section will divide the causes into three aspects, supply, stability and long-run effect. In resource supply, let’s take oil as an example. In coordinate with appendix two, we can find that around 1993, oil consumption already caught up with domestic production and has overtaken it. Since then, the supply gap has been rapidly enlarging as a result of great domestic demand. It is estimated that China production and consumption of oil per day are 4416000 barrels and 10276000 barrels (May 2013,US Energ...

... middle of paper ...

... utilizing source but more importantly, the technology can be used in exploiting new and cleaner energy. Around 70% of energy consumption in China now is coal that is considered to pollute the environment most and the new energy like nuclear and hydroelectric plays a little part in the energy structure. And the lack of advanced technology is a core factor of the circumstance. Therefore, M&A is supposed to offer technology and further energy restructure in China.
In conclusion, cause of overseas M&A is that it is able to better development for energy enterprise in larger markets and advanced technology and strategic development of China in more stable and sufficient energy supply and restructure of energy consumption. Vice versa, this pushes Chinese overseas M&A in natural resources.

Reference: May 2013,US Energy Information Administration), overview data for China

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