Just ten years ago, Chinese state oil companies were seen as neophytes at the game of acquisitions and mergers. After suffering a few losses, they have become major players.

Beijing (AsiaNews/Agencies) – After a decade of setbacks and humiliating failures, Chinese oil companies have become major players in the global energy business. In lieu of frontal attacks to buy up assets, they have successfully learnt that it is best to get a seat on boards of directors around the world.

Analysts note that China’s three state oil companies—China National Petroleum Corp (PetroChina), China Petrochemical Corp (SINOPEC) and China National Offshore Oil Corp (CNOOC) —have made giant strides. They have larger, more sophisticated mergers and acquisitions departments staffed with lawyers, engineers and country-specific experts, many of whom are bilingual. They are more diligent and have streamlined their bureaucracy to make decisions quickly.

In general, they avoid bottom fishing (taking majority control) in favour of only partial stakes to avoid political repercussions, such as charges of throwing their weight around, which tends to cause nationalist reactions in countries whose assets they want to buy.

A case in point was CNOOC’s failure to buy Unocal Corp in 2005 for US$ 18.5 billion because of stiff opposition from US politicians.

Since then, Chinese oil executives have learnt their lesson and have successfully bought non-controlling stakes in assets in Nigeria and Argentina worth US$ 5.8 billion.

Facing heightened protectionism in the wake of the global financial crisis, CNOOC chairman Fu Chengyu said the company would rather pursue "cooperation that results in win-win situations" than outright takeovers.”

"There has been this opinion in the mainland media, that Chinese companies should go out and bottom-fish in the wake of the global financial crisis," Fu said. “But in acquisitions, the key is not how cheap an asset is, but whether as an acquirer we can add value to the asset. We shouldn't be buying simply because it's cheap."

A recent survey of 110 mainland executives by the Economist Intelligence Unit suggests the country's business leaders should listen to his counsel. About 82 per cent of respondents cited a lack of management expertise in handling outbound investments as the biggest challenge facing their overseas acquisition ambition. Only 39 per cent felt they know what is required to integrate a foreign acquisition.

The exception is the oil business. Chinese oil companies have gained experience and learnt the rules of the game. China Petrochemical last month offered US major ConocoPhillips US.65 billion for a 9 per cent stake in Canadian oil sands project operator Syncrude.

Analysts noted the price was 25 per cent higher than the market value of Syncrude's largest shareholder, Canadian Oil Sands, whose primary asset is the Syncrude stake, but for Zhang Xiuping, Deutsche Bank's head of China mergers and acquisitions, the deal was not expensive, given the rarity of a significant Syncrude stake being offered for sale.

However, the Chinese are not the only players. Asian companies lead the pack with companies from India and especially South Korea, whose companies have become a formidable force after having done acquisitions valued in excess of US$ 3 billion in the past few years.

Europe is not out of picture either. In March, Britain's BP surprised the market by striking a US$ 7 billion deal for Devon Energy's international assets.

Overall, deals this year totalled US$ 8.2 billion up to 13 April, compared with US.79 billion for all of last year.

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