US firms losing ground to China in sector investment

Thursday, December 2, 2010

US firms are struggling to compete with Chinese expansion into Latin America's oil and gas industry due to the lingering credit crunch, Latin America trade expert and Boston University professor Kevin Gallagher told BNamericas.

"The obvious competitors (to Chinese firms) would be private firms in the US, but with our current credit squeeze, these firms aren't in an expanding mode. To a certain extent the US is losing some ground in terms of competing in this burgeoning market," Gallagher said.

This week Bridas Corp, 50% owned by China's CNOOC, completed the acquisition of a 60% share in Pan American Energy, Argentina's second largest oil company, in a deal worth US$7bn. And last month Spain's Repsol announced it had reached an agreement to sell 40% of its Brazilian unit to China's Sinopec for US$7.1bn.

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Chinese firms have also invested heavily in Venezuela, developing several JV's with state oil company PDVSA focused on production projects in the Orinoco Crude oil belt. As part of the cooperation between the countries, China's development bank has loaned Venezuela's government large sums to invest in energy infrastructure projects, receiving crude oil shipments in return.

"The Chinese firms are part of a state-backed apparatus, giving them a leg up in terms of their ability to expand overseas," Gallagher said.

China is also snapping up a larger part of the region's natural resource exports. Latin America as a region has supplied around 9% of China's total oil imports so far this year, up from 6% in 2009, according to estimates from UK-based investment bank Barclays Capital.