China Watch: China National Petroleum to Take Over Exxon Mobil Stake in Iraq Oilfield?

By Sterling Wong  DEC 21, 2012 3:20 PM

Yum Brands and Apple also make the news.

 


MINYANVILLE ORIGINAL The Chinese economy may have slowed dramatically in 2012, but noted China bull Jim Rogers remains strongly optimistic about growth prospects in the world’s No. 2 economy, especially in the long run.
 
“People who sold America in 1912 may have looked good for a while, but over the next 90 years or so they looked pretty foolish,” Rogers, who co-founded the Quantum Fund with George Soros in 1973, tells Bloomberg. “That’s my view of China.”
 
Rogers isn’t too bothered about the princeling corruption scandals, notably the case of former Chongqing party leader Bo Xilai, that have rocked China this year.
 
“Before I cast stones at the Chinese way, we all have to examine the American way. There have been pretty serious disasters in the US in the past 10 years, and nobody at a reasonable level has been prosecuted, much less gone to jail,” he says.
 
Here is this week’s business news:
 
China National Petroleum Corp: The state-owned oil and gas corporation is now the most likely candidate to purchase Iraq’s West Qurna-1 oilfield from Exxon Mobil (NYSE:XOM). After a dispute with Baghdad over contracts it inked with the autonomous Kurdistan region, Exxon is relinquishing its 60% stake in the $50 billion oilfield in southern Iraq. Royal Dutch Shell (NYSE:RDS.A) owns the remaining 40% of the resource.
 
"PetroChina is in talks to buy the stake from ExxonMobil. There are rival bidders," a source familiar with the Chinese company, told Reuters. "A decision is expected from ExxonMobil soon."
 
Russia’s Lukoil (PINK:LUKOY) is a possible rival bidder, though the company has yet to offer one. With Exxon’s impending exit, Iraq’s southern oilfields will be all but free of an American presence, with only Occidental Petroleum (NYSE:OXY) left with a small holding in the Zubair oilfield.
 
Yum Brands (NYSE:YUM): KFC was in the hot soup in China this week after the state-run China Central Television (CCTV) ran a news report that alleged that there was excessive antibiotics used in the chickens the fast food giant sourced from Chinese companies.
 
CCTV named Liuhe Group and Yingtai Food Group as the two suppliers of chicken to KFC and McDonald’s (NYSE:MCD). The two restaurant chains have since stopped receiving deliveries from those suppliers and have said they would cooperate with suppliers to ensure food safety.
 
China has seen a series of high-profile food safetty-related scares over the years, including a 2008 scandal where infant formula and other milk products contaminated with melamine killed six children and sickened some 300,000. Yum Brands, which counts on the mainland for half of its profits, will be hoping that that this controversy goes away quickly.
 
Apple (NASDAQ:AAPL): There may not have been long riot-inciting queues like those witnessed at the iPhone 4S launch, but Apple’s iPhone 5 debut in China this past weekend was a record-setting one. The company announced in the three days since its December 14 launch, more than two million iPhone 5s have been sold in the mainland.
 
“Customer response to iPhone 5 in China has been incredible, setting a new record with the best first weekend sales ever in China,” said Tim Cook, Apple’s CEO. “China is a very important market for us and customers there cannot wait to get their hands on Apple products.”
 
According to Apple, the iPhone 5 will be in stores at over 100 countries by the end of the year, making it the swiftest iPhone roll-out ever.
 
UnionPay: Watch out, Visa (NYSE:V), Mastercard (NYSE:MA), and American Express (NYSE:AXP) -- UnionPay, the only domestic bank card organization in China, is coming for your customers.
 
Launched 10 years ago with 85 Chinese banks, UnionPay now has 2.9 billion cards in circulation. In the first half of 2012, it held a 23.8% share of the global credit- and debit-card transaction volume, second only to Visa.
 
“UnionPay has absolute dominance in China, and it’s now expanding beyond that to become a top global player,” James Friedman, an analyst at Susquehanna International Group, told Businessweek. “Their numbers show they are already in the league of Visa and Mastercard.”
 
In China, credit- and debit-card receivables are projected  to rise to $397 billion (2.5 trillion yuan) by 2015, with UnionPay leading the growth surge. Revenue at UnionPay has improved more than 400% in the last four years, with profits jumping an impressive elevenfold to $1.07 billion yuan.
 
General Motors (NYSE:GM): To compete against German luxury auto makers such as Volkswagen (PINK:VLKAY), GM will increase the dealership count of its upscale Cadillac brand in China by some 25% next year, said GM China president Bob Socia this week.
 
GM currently has about 160 Cadillac dealers in the mainland and will add some 40 more next year. The upscale Cadillac brand is key to GM’s plans to improve profit margins, said Socia.
 
"We've struggled in the past, there's been a new commitment so to speak, from General Motors about what we want to do with the Cadillac brand," said Socia, according to Bloomberg. "It's a journey, you're not going to do this in a year or two, but you've got to come up with product that unequivocally can compete."

Twitter: @sterlingwong
No positions in stocks mentioned.

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