China Focuses on Indonesia for Resource Deals

Source:

"Natural gas is at the top of China's shopping list. . ."

Last year, Australia drew Chinese suitors seeking energy, metals and coal deals. Now it's Indonesia, the resource-rich nation of 17,000 islands.

China's appetite for natural resources, from coal to gas to oil, is undiminished despite 2009's acquisition spree in Australia, Canada and Africa.

While those countries are still on China's radar, Indonesia is commanding ever more of its deal-making attention.

PetroChina, Sinopec, Sinosteel, Minmetals and China Investment Corp (CIC), a $300 billion sovereign wealth fund, are all scouring South East Asia's largest economy for takeover targets and joint venture partners, according to investment banking sources who advise the companies.

Targets include LNG projects, oil blocks owned by foreign companies and coal mines, with some potential deals worth more than $1 billion, according to the sources.

"There's enormous interest from China in Indonesia," said an Asia-based investment banker who has advised regional resources companies on deals in Indonesia. "These include financing deals, stakes."

Natural gas is at the top of China's shopping list, the sources said. The sources declined to be named due to their relationships with Chinese clients.

China is struggling to rely on gas for more of its surging energy needs—its LNG imports increased by two-thirds last year to 5.53 million tons or 7.7 billion cubic meters (bcm).

Indonesia has multiple LNG projects in need of financing and development partners, and China is hungry for a slice of the action.

Indonesia comes with ample risks—from political corruption to opaque resources industry regulations to growing resource nationalism. But China has already set the stage for more aggressive deal making in Indonesia's politically sensitive resources industry.

"It's one of their focus destinations," said Gordon Kwan, of Mirae Asset Securities, adding that China will also be looking to do major deals in other regions such as Africa and Central Asia.

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