China corporate governance report: CNOOC interview

Especially during the financial crisis people have more concerns about their own situation. We are not going to go out and buy foreign companies, but are going to look for opportunities to work together with them so we both can grow. Only when you show this will people believe what you are doing is not bad for them. This will take time. 10 years ago China remained a mystery. People don’t realise that we’ve learned from western countries, we keep changing ourselves, criticising ourselves. When we joined WTO we joined them, they didn’t join us, we changed ourselves to meet their requirement. In a new world we need to keep learning and changing ourselves.

Fu: I think this is one part outsiders do not understand. Why do we grow so fast? Why do we, with the same criteria, assets and industry, grow faster? Even though we are a state-owned company, it’s no different from any public shareholders. No government leaders or officials are sitting on our board. All business decisions are made by the board itself. A lot of people from outside China think all our business decisions are based on government requirements, which is not true. When we make a decision to do anything, it’s purely business.

Where we are responsible to the government is for rules and regulations, doing our business by law; if we need government approval for major projects, where they review our commercial, technical, environmental or safety areas; and when we go outside [overseas], we don’t need their approval, but if I transfer foreign currency from China to other countries, I need their approval. If I spend $18.5 billion on Unocal they don’t know if that’s high or low, it’s a business decision. But if you’re using foreign currency, US dollars, I need to get an approval. But I will make sure I pay my taxes and dividends – that is, at the end of the day, what they really need.

A lot of foreign media are saying we are going out because the Chinese government needs resources and energy. Yes, it’s true. But when they need it, they can buy it. And, for example, in Nigeria, I would not take the oil produced from Nigeria back to China. If there is a market, I will sell to that market, I will sell to the locals, I will buy from anywhere. I don’t have to transfer it from far away: that costs more. Oil is one world market. A lot of people say you’re going there to take their resources back here to China. That’s stupid.

When we were fighting for the Unocal deal, we said we will not be selling this crude to the China market – the US market is more expensive, with higher prices, so that’s good! People when they say these things are very naive, they don’t have business sense.

Euromoney: You mentioned Nigeria. One theme we have seen in the energy industry is more interest in Africa, which takes you into some unpredictable markets, in your case chiefly Nigeria. How do you uphold good standards of business and governance in those markets?

Fu: We do invest in Africa, especially Nigeria, and certainly there’s a lot of risks, especially political risk. But there’s no area that you invest in where there is no risk. The risks you can manage without major losses. You will see we didn’t invest in certain areas, the former Soviet Union, Latin America, because I believe I cannot control those risks.

 Secondly, wherever you operate you must meet local needs, it’s not about your needs. If they don’t need you, whatever you do is not necessary. When we go there, every time I meet their leaders, I don’t ask: this is something I want to do. I ask: what do you need me to do? And if you don’t need me I will go. A lot of poor countries like Nigeria are not short of oil companies, but they need infrastructure, and nobody wants to do this. We can help them. I can get companies to come here to invest: you have government shares from oil, you can use those as a guarantee, so you can pay in the future when I’ve got the resources out. You don’t spend one cent and you get two things, developed resources and developed infrastructure. And when you meet their needs, they also try to help you.