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You've got a perfect hand at the
blackjack table... and you've got a lot of patacas
in your bet pile.
The night's been lucky for you at the Lisboa Macau, and you've got an upgrade coming your way
if your luck holds out. The dealer's showing 15, then 19, then bust! Looks
like you'll be smiling all the way to your luxury suite.
The dealer's counting your winnings
when the Lisboa suddenly goes dark...
It's pandemonium. Like something out
of Ocean's 13, when George Clooney and Brad Pitt engineer a fake
earthquake to empty out their rival's casino, the Bank -- people screaming,
grabbing chips, pushing, stampeding to get out.
But it's not a movie.
China's Guangdong province just cut
power supplies, and outages have trickled down to the luxury playground of
Macau.
Think it can't happen? Insiders are
already predicting it will.
China Southern Electric Power Grid
said five southern provinces -- including Guangdong -- could face power
shortages of up to 7 or 8 gigawatts (GW) in the
third quarter of this year. The word "could" implies a chance of
power shortages, but there's more than just a chance in this instance.
In the first half of 2011, these five
provinces have had to cut 9.01 GW because of tight electricity supplies and
high demand.
Is it any wonder, then, that China is
rushing around spending tens of billions of dollars on foreign energy
acquisitions?
The latest grab is CNOOC's (CEO:NYSE) $2.1 billion deal to buy OPTI
Canada (OPC:TSX),
an oil sands company short on cash. The deal will give CNOOC 195 million
barrels of proven reserves. It's not the first Canadian oil sands deal that
CNOOC has entered. In 2005 the company bought a stake in MEG Energy Corp.
(MEG:TSX). The $158 million deal bought
CNOOC reserves, and access to expertise that the company could use for
projects in China.
Chinese companies are hungry for energy
deals. Over the past five years, China has bid $88 billion on international
energy assets.
Power consumption is up in China. This
isn't anything new for the fast-moving country, but what is new is the rate
at which China is importing its natural gas.
Reuters reports:
The [National Development and Reform
Commission] said China's natural gas imports in the first half of this year
grew 100 percent from a year ago to 14.1 billion
cubic metres (bcm).
This suggests the country brought in a
record 2.7 bcm of the fuel last month based on
January-to-May import figure released earlier by the commission.
Of the imports in the first six
months, gas piped in from central Asia totalled 6.9 bcm
and imports in the form of liquefied natural gas were at 7.2 bcm, it said.
The overall imports accounted for 22.4
percent of China's national gas consumption, 9
percentage points higher than a year earlier.
Apparent gas consumption in the first
half gained 21 percent on year to 63.1 bcm, according to the commission.
China is in the midst of a huge energy
shift. It wants to generate more power from natural gas, and less power from
coal. But its domestic resources can't keep up. PetroChina
(PTR:NYSE)
supplied 1.83 billion cubic meters of natural gas to six power plants -- a
boost of 64.9% from the previous year.
That kind of growth is unsustainable
-- unless you get supplies from other sources.
And that's why China is so frenzied...
That's why companies are shelling out billions for energy deals. Many of
these deals involve Canadian companies, and there are a lot of investment
opportunities in this region.
Look to the smaller, cash-strapped
companies for possible acquisitions, and look to the bigger, established
companies for joint ventures.
But there's another area that China's
struggling to make a deal with: Russia.
Despite a memorandum signed by both
countries in 2009, a pipeline is still just a pipe dream. The two countries
can't agree on a price for natural gas. Russia wants to charge $350 per cubic
kilometer, but China doesn't want to pay more than
$235.
Why such a big difference? Russia
charges its European customers $350, but China can buy natural gas from
Central Asia or Australia for less than $180.
There will eventually be a deal
between these two countries, but it will take a lot of haggling. When it
happens, though, keep an eye on Russian energy companies, and pipe builders.
Some analysts say a deal could add 2% to Russia's GDP.
That kind
of economic boost paired with China's increasing demand for natural gas
makes a pipeline deal almost inevitable.
Sara Nunnally
Taipan Publishing Group
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originally published here
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