China is pouring another $7bn (£4.4bn) into Brazil’s oil industry, reigniting fears of a global “land grab” of natural resources.
State-owned Sinopec clinched the deal with Spain’s Repsol yesterday to buy 40 per cent of its Brazilian business, giving China’s largest oil company access to Repsol Brasil’s estimated reserves of 1.2 billion barrels of oil and gas. The whopping price tag for Repsol Brasil – which values the company at nearly twice previous estimates – is a sign of China’s willingness to pay whatever it takes to lock in its future energy supplies and avoid social unrest. It will give the company enough cash to develop all its current oil projects, including two fields in the Santos Basin.
The Repsol deal is not China’s first in Brazil. In February last year, Sinopec stumped up a $10bn loan to Petrobras, the state-owned oil company, in return for guaranteed supplies of 10,000 barrels of oil every day for the next 10 years.
It also follows a slew of similar deals across the world. While much of the developed world is baulking at its debts in the aftermath of the financial crisis, China has continued a global spending spree of unprecedented proportions, snapping up everything from oil and gas reserves to mining concessions to agricultural land, with vast reserves of US dollars.
This year alone, Chinese companies have laid out billions of dollars buying up stakes in Canada’s oil sands, a Guinean iron ore mine, oil fields in Angola and Uganda, an Argentinian oil company and a major Australian coal-bed methane gas company.
“China is rich in people but short of resources, and it wants to have stable supplies of its own rather than having to buy on the open market,” Jonathan Fenby, China expert and director of research group Trusted Resources, said.
But it is a strategy causing anxiety elsewhere in the world. Rumours in recent weeks that China’s Sinochem may make a bid for Canada’s Potash Corporation raised fears that the Middle Kingdom would corner the global market for fertiliser.
Similarly, when BP’s share price plummeted after Barack Obama’s criticisms in the wake of the Gulf of Mexico oil spill, there was concern that the company would be driven into the hands of the Chinese.