Sunday, July 10, 2005
Meet the Beijing Ceo Who Wants to Buy a U.S. Oil Firm
By Joe Mcdonald
The Associated Press
BEIJING The chairman of CNOOC Ltd. and the public face of its $18.5 billion bid for Unocal Corp. prides himself on his and his company's Western ways.
CEO Fu Chengyu speaks fluent English, earned his master's degree in Los Angeles and tells interviewers he has that most un-Chinese of traits he drinks coffee, not tea.
Under Fu's leadership, state-owned CNOOC has won a reputation as one of China's best-run companies, with a Western-style focus on transparent finances on top of its two decades of experience dealing with foreign partners.
"CNOOC management generally gives an image of being more like a Western company, compared with other Chinese state companies," said Gideon Lo, an industry analyst for DBS Vickers Securities in Hong Kong.
Overnight, the Unocal bid made Fu the most famous of a generation of Chinese managers who are trying to turn lumbering, state-owned companies into nimble, profitable competitors. The biggest among them are pursuing a multibillion-dollar wave of foreign acquisitions.
At 54, Fu brings an unusual mix of skills to his task experience in the grimy work of oil drilling, plus an American education and exposure to the top ranks of the global oil industry.
Fu went to work for China National Offshore Oil Corp. when it was created in 1982 to make deals with foreign partners to drill for oil in China's coastal waters. The company is the mainland parent of Hong Kong-based CNOOC Ltd., China's third largest oil company.
In the early 1980s, Fu joined the first wave of Chinese graduate students in the United States, earning a master's in petroleum engineering from the University of Southern California.
Back in China, Fu spent a decade overseeing ventures with BP Amoco, Texaco, Phillips Petroleum, Shell and Chevron, the Chinese firm's rival in the bidding for Unocal, the ninth-biggest U.S. oil firm.
"Those experiences made me understand more and more the international oil industry and the importance of international capital markets," Fu told The Financial Times newspaper. "We are not really like other Chinese companies. Our systems, models and processes are more like our Western counterparts'."
Fu also speaks the language of corporate America.
When CNOOC pronounced "SEE'-nook" made its Unocal bid, Fu got personally involved in wooing shareholders and management, promising a better payoff than Chevron and almost no job losses.
He has stepped up his role as his company's chief image-maker, giving interviews to the Western financial press and trying to ease U.S. worries about security risks of letting a Chinese state firm take over an American company.
Fu insists that despite CNOOC's government ties, the latest offer is strictly commercial. A day after the bid was announced, he said the company was willing to discuss selling some Unocal assets and putting others under American management.
"We know this bid is historic for both companies and will be closely scrutinized by everyone involved," Fu said in a letter to the U.S. Congress, saying that CNOOC was eager to submit to regulatory review.
CNOOC Ltd. was created in 1999 as the Hong Kong arm of its Chinese parent. The parent bestowed on the new firm its plum asset a monopoly on oil and gas drilling in China's coastal waters.
Creating such a Hong Kong base is a popular first step for Chinese state firms that venture abroad. They can tap the territory's financial markets and talent pool, and its respected Western-style legal system reassures foreign customers and partners.
CNOOC's work force is tiny by the standards of China's oil industry, with just 2,524 employees, compared with tens of thousands at the state firms that operate the country's mainland oilfields.
Profits last year rose 40.3 percent to a record-high 16.2 billion yuan ($1.95 billion), the company says.
It also says it is trying to grow beyond its early reliance on foreign contracts by developing its own independent projects. It has taken part in drilling work in Indonesia and Australia.
Fu was named head of CNOOC in 2002 and president of its Chinese parent early the next year. At CNOOC, he was paid 1,880,000 Hong Kong dollars ($240,000) last year a huge sum for China, where urban incomes per person average just $1,000 a year.
The Chinese parent owns 70 percent of CNOOC, but the Hong Kong firm has four independent directors.