China’s massive game of global resource domination looks set to continue well throughout the decade.
The Chairman of state-owned PetroChina says the company plans to spend $60 billion on a global expansion over the next 10 years, according to Bloomberg. Right now just a tenth of its production comes from overseas, but it’s goal is to bring that to 50% by 2020.
The timing of the announcement is interesting because it comes just as reports emerge about allegedly underhanded tactics used by CNPC (PetroChina’s corporate parent) in securing international oil rights.
The story that’s brewing right now takes place in Kazakhstan, and is therefore complex and disputed.
Here’s the 10-second gist from the WSJ:
Mukhtar Ablyazov, now living in London, accuses Mr. Kulibayev, the chairman of Kazakhstan’s state oil company, of being behind several privatization deals over the past 10 years in which state assets were allegedly sold off at well below market value.
The banker claims some of those transactions were made possible by private payments to Mr. Kulibayev’s associates. One of his most incendiary allegations centers on a 2003 deal in which a Chinese oil company bought a 25% stake in a Kazakh oil producer. As part of that complex transaction, a business partner of Mr. Kulibayev allegedly realized a $166 million gain on an initial investment of $49, corporate documents of the deals indicate.
A longer, but very worthwhile version of the story comes from investigative reporter Steve LeVine the author of The Oil and the Glory: The Pursuit of Empire and Fortune on the Caspian Sea.
LeVine claims that years ago he saw the documents detailing the alleged corruption:
The documents chronicle the 2003 sale of a 25% share of Aktobe Petroleum, a company that controls some 822 million barrels of oil in northwest Kazakhstan, near the Russian border. Nazarbayev announced the winning bid of $150.1 million by China National Petroleum Corp., which already possessed 60.2% of the company. What wasn’t announced was the identity of CNPC’s partner in the deal: interests close to Kulibayev.
A company close to Kulibayev called Darley Investment Services received a $25.9 million payment from CNPC and a 20% share of the acquisition, according to the documents. For this, Darley contributed all of $49 to the deal, the documents say. The documents detail how CNPC ultimately bought out its partner for another $140 million, bringing the payday for the presidential son-in-law’s interests to a total of $165.9 million (details below). CNPC has denied any wrongdoing.
Some of the documents were posted on the Web site of a weekly newspaper owned by Mukhtar Ablyazov, a controversial Kazakh banker seeking political asylum in Britain. Ablyazov’s United Kingdom assets have been frozen since last summer, when Kazakh prosecutors accused him of embezzling more than $300 million while BTA Bank, of which he was chairman until February 2009, lost more than $6 billion. Ablyazov, living in London, denies the accusations. Meanwhile, he is in a death grip with Kulibayev.
Assuming there’s something to the story, it’s worth asking: is this a China story or a Kazakhstan story? That Chinese SOEs (state owned enterprises) would use all manner of tactics to secure resource rights wouldn’t be particularly shocking. And as PetroChina embarks on its massive expansion plan, this will be a story to watch.
On the other hand, we know that Kazakhstan is a home of resource scandals, and the securing of energy rights there is going to be rich with controversy and politics. Last May we wrote about the controversial manner by which Bill Clinton ally Frank Giustra secured Uranium rights there.
In a post-soviet, resource rich state like such as this one, this is all par for the course.
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