China eyes expanding overseas energy

February 17, 2009
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, BEIJING, Feb 17 – China may use its world-biggest foreign exchange reserves to set up a fund focused on expanding overseas energy resource exploration, Chinese media reported on Tuesday.

Separately, the government is looking at other ways to help finance Chinese companies to invest in, or take over, foreign energy firms, the China Oil News and other Chinese newspapers said.

These measures are part of an industry development plan for the next three years unveiled at a recent National Energy Work Conference that looked at boosting China\’s oil and gas output.

The China Oil News, run by the China National Petroleum Corporation (CNPC), the country\’s largest oil producer, first reported the plans on Monday. It gave no further details about the fund or when it may be set up.

Global markets and Chinese investors are eager to see how the government plans to use its vast forex reserves which stood at 1.95 trillion dollars at the end of 2008, up 27.3 percent from the previous year.

The China Business News said on Tuesday that with world oil prices off record highs and down to 30-40 dollars a barrel, the fund and the other potential measures would ease financial pressures for Chinese energy firms.

An unnamed senior official with CNPC also said it was a good time for asset purchases and the company remained interested in overseas acquisition this year, the report said.

China has become increasingly keen on seeking overseas natural resources to fuel its rapid economic growth.

State-owned aluminium firm Chinalco said last week it had proposed injecting 19.5 billion dollars into troubled Anglo-Australian mining giant Rio Tinto — which if approved would be the most money China has ever invested in an overseas company.

In 2005, CNPC bought PetroKazakhstan for 4.18 billion dollars. The Kazakhstan oil producer then had a capacity of producing seven million tonnes of crude oil a year.

In September 2007, China used part of its forex reserves, the world\’s largest, to set up a 200-billion-dollar sovereign wealth fund.

The fund has largely focused on financial investments, with its headline investments so far being stakes in Morgan Stanley and private-equity firm Blackstone.

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