Have the Chinese National Oil Companies Paid Too Much in Overseas Asset Acquisition?

34 Pages Posted: 24 Jan 2020

See all articles by Xiaoyi Mu

Xiaoyi Mu

Center for Energy, Petroleum and Mineral Law and Policy, University of Dundee

Date Written: January 23, 2020

Abstract

This paper provides both a quantitative and qualitative analysis of whether the Chinese oil companies have “overpaid” than international oil companies in overseas asset acquisitions. By controlling oil price and a number of asset- and deal-specific attributes that are known to affect the valuation of oil and gas projects, we find that while the Chinese companies did not overpay than international oil companies for the period of 2001-2008, there is statistically significant evidence that they overpaid during the 2009-2016 period (mainly 2009-2013). The counterfactual analysis indicates that the Chinese companies paid, on average, 64 percent more than what an international oil company would have paid for the same assets during the post-2008 period. Interviews with industry experts and qualitative analysis suggest that the overpayment mainly results from a series of mistakes due to lack of experience and rush for projects in a period of high oil prices rather than concerns about energy security or other political considerations. The results raise concerns over the efficiency and corporate governance of Chinese state-owned companies, pointing to the need for further reforms.

Keywords: China, National Oil Companies, asset acquisition, state-owned enterprises, political economy, China model, corporate governance

JEL Classification: G34, Q40, F52

Suggested Citation

Mu, Xiaoyi, Have the Chinese National Oil Companies Paid Too Much in Overseas Asset Acquisition? (January 23, 2020). USAEE Working Paper No. 20-430. Available at SSRN: https://ssrn.com/abstract=3524134 or http://dx.doi.org/10.2139/ssrn.3524134

Xiaoyi Mu (Contact Author)

Center for Energy, Petroleum and Mineral Law and Policy, University of Dundee ( email )

University of Dundee
Dundee, Scotland DD1 4HN
United Kingdom

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