Chinese interests won't be harmed
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The turmoil in Libya will not affect Chinese oil firms' investment in Africa, and the decreasing asset valuation in the region may instead open up buying opportunities for domestic companies, Citigroup said on Tuesday.
"The problem is only in Libya. Whatever the resolution of the political unrest is, we remain confident that Chinese assets and interests will not be affected in Africa," Ade Ayeyemi, head of the Africa Division of Citibank's Global Transaction Services, said.
China National Petroleum Corp (CNPC), the biggest oil producer in China by capitalization, which has oil exploration business on Libya's northwestern coast, evacuated its staff from the country in February as concern increased over the turmoil in the country.
The Libyan crisis may lead to a difficult environment for foreign investment, but investments from Chinese companies in Africa will not be affected because of the positive relationship between the Chinese and African governments, Ayeyemi said. "There's no country that I know of in Africa that has a specific issue with Chinese investment."
The opportunity for Chinese companies that arises from the political turmoil is that the valuation of the properties is coming down, Ayeyemi added.
The unrest in Africa's third-biggest oil producer has led to about a surge of about 6 percent in crude oil prices on the New York Mercantile Exchange in the first two months of 2011.
Libya's supply is estimated to have decreased by 195,000 barrels a day in February to 1.39 million barrels a day, according to the Paris-based International Energy Agency.
North Africa's oil output and exports may remain disrupted because of damage to oil facilities arising from the regional political unrest.
There is a slight price premium on the mergers and acquisitions becuase of the surge in oil prices, but it's not a "bad time" for cross-boarder transactions when a number of major oil companies are divesting their assets, said Peter Langshaw, head of Global Industry, Energy, and Power & Chemicals under Citibank's Global Transaction Services.
The Libyans have every interest in maintaining the oil flow to generate income, so the disruptions to supply will not last long, no matter who is in the government, said Ewan Copeland, vice-chairman of Global Corporate Bank at Citigroup.
The Organization of the Petroleum Exporting Countries has no interest in seeing oil prices rise too high, so it will do its best to maintain a stable price over the long term, he said.
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