Fu helps Sinopec navigate overseas markets
Updated: 2012-11-20 10:04
By Diao Ying in London (China Daily)
Shortly after Fu Chengyu became chairman of China Petroleum and Chemical Corp, or Sinopec, the company arranged to have an interpreter accompany him to an event where he was to speak to foreign guests.
There, the 61-year-old gave practically everyone a surprise by speaking fluent English.
After that, several of his associates said they needed to learn English.
Chinese energy companies are becoming more and more of a driving force in the global energy industry.
Fu, dressed in a blue, pinstriped suit, is as familiar with Western business practices as he is with Chinese politics.
His career underwent a large change in 2011, when he went from China National Offshore Oil Corp, or CNOOC, to Sinopec. His new employer, for one, is a much bigger company, now having the second-largest refining capacity in the world and nearly 2 million active and retired employees.
On the third day that Fu was in his new post, he found himself contending with a scandal. Media outlets were reporting that a company official had spent millions of yuan on liquor. As is usual in State-owned companies, Fu responded immediately. Within several days, he removed the corrupt official, called for the company to conduct a self-examination and held briefings to answer public questions.
Fu Chengyu,chairman of Sinopec
"At first, I was influenced by the general way things are done at Sinopec," he said. "I first tried to become integrated. If I remained an outsider and didn't integrate, I wouldn't be able to have any influence. Adapting has helped me do my job better."
From April 2011 to October, Sinopec completed 10 overseas deals that, taken together, were worth $13 billion.
Ivan Sandrea, president of Energy Intelligence Group Inc, a research agency, said: "Fu is a transformational figure in China's oil industry and emerging markets as a whole. By effectively harnessing China's strong technical skills, he has been a catalyst in the globalization of his country's petroleum business."
Before receiving an award earlier this month in London for being a leader in the global oil industry, Fu used Chinese idioms to speak about lessons that he believes will be of use to Chinese companies trying to have an international presence.
"It is no longer a risk when you realize it," he said.
Among other leaders of Chinese companies, many say, Fu distinguishes himself by his ability to manage overseas mergers and acquisitions.
In 2005, he led CNOOC, one of the three State-owned oil companies in China, in its ultimately unsuccessful attempt to purchase the American oil company Unocal Corp for $18.5 billion.
During the time leading up to the proposed transaction, he was questioned both at home and in the United States. In the US, the bid was seen as a threat from China. In China, people wondered whether his ambitions matched his abilities, asking questions such as: "Is the snake going to eat an elephant?"
Outsiders did not understand what he was trying to accomplish, he said. For him, the risks he took were calculated. He said he felt certain the proposed transaction would prove profitable.
For one, he believed Unocal's share price was undervalued. The US company had 4 billion barrels in its gas reserves but had only registered 1.7 billion barrels. As soon as the rest of that reserve were made public, he said, the company's share prices would go up.
He also had clear ideas about Chevron Corp, CNOOC's rival in the bid. Chevron had extra gas it could not sell, and Fu thought the company's share price would only decline if it bought more gas assets from Unocal. CNOOC, though, was trying to meet the oil demand in China, which was strong at the time.
"It was a simple equation," he said. "I dared to offer the high price because I thought it could go up even further."
The bid was eventually blocked by the US government. Even so, that failure turned out to be a prelude to a series of mergers and acquisitions rather than an end to such transactions.
Since Fu joined Sinopec, the company has made more than $10 billion in overseas investments in the past two years and now has assets in Africa, South America, the Middle East, the Asia Pacific region, Russia and Central Asia, as well as North America.
In 2011 alone, it completed five overseas oil and gas mergers and acquisitions. One was the purchase for $5.1 billion of Brazilian deepwater assets owned by the Portuguese company Galp Energia Group.
This year, it bought a third of Devon Energy Corp's stake in five shale projects in the United States. It also intends to buy a 49 percent stake in Talisman Energy Inc's UK subsidiary. When completed, the deal will give it access to 51 North Sea oil and gas fields.
A Sinopec drilling site in Sudan. [Photo/China Daily]