|China Needs More Risk Takers for Energy Business|
|by Tom McGregor||Tue, Mar 18, 2014, 05:24 AM|
BEIJING: As China emerges as a global economic superpower, the country faces growing demand for power, but remains a net importer for its energy resources. Beijing is hoping to become more energy independent, but companies (State-owned and privately-owned) must take greater risks to succeed in the long term.
In an exclusive interview with the Dallas Blog, Paul Atherly, managing director of Leyshon Energy, discussed his ideas to boost domestic energy supply and keep China on the cutting edge of the oil & gas industry.
Atherly believes that the Texan way of doing business should inspire the Chinese to follow in their tall bootsteps. "Texans are great risk takers. They have a 'can do' attitude even when they are faced with limited resources," said Atherly.
He added, "Texans understand how to take a risk against the elements and they maintain a strong entrepreneurial spirit."
He is encouraging companies that are involved in the energy business in China to remain optimistic even when disapointments and obstacles have become more burdensome.
Nevertheless, China must undergo more serious reforms and reduce the power, influence and subsidies of State-owned enterprises (SOEs). These firms fear failure so much that they worry more about the costs of an investment rather than if an exploration project can succeed.
"They have not applied enough risk capital," said Atherly. "It's essential for oil & gas companies to get access to risk capital and reward risk takers." Perhaps, this would explain the Texas Economic Miracle.
Atherly contends that the opening up of China means allowing for greater business risks even if that means more failures would ensue. It's more necessary than ever before or China will struggle to produce enough energy resources on its own.
China holds some of the world's largest reserves of shale gas, along with a plentiful supply of coal. The Sichuan Basin in Southwest China has already proven to be a lucrative market for foreign energy companies.
"But China must also get up to speed on its major technological and structural gaps in the energy sector," said Atherly. He noted that there are many isolated regions in the country, where it's difficult for drillers to reach underground reserves.
Xu Shen, business development manager of Leyshon Energy, explained that some areas of China are so isolated that they do not have reliable roads or pipelines to transport gas. Despite Chinese companies using the most advanced technologies in major exploration projects, they utilize 'primitive' equipment for small projects.
Atherly believes that there are still big-time opportunities for foreign technology experts and investors here; but they must be willing to take greater risks. That means bringing their technical expertise to the small exploration projects in China.
China's grand urbanization plan could play a more profitable role for energy companies too. Beijing is attempting to urbanize the rural countryside, which means transforming its small villages and towns into more modern cities and suburbs. The State Grid, a network that provides electricity to consumers in China, must be connected on a grander scale and in a more elaborate manner.
Meanwhile, the Chinese government has recently introduced a broader range of reforms. Beijing hopes to reduce subsidies granted to SOEs and encourage more foreign direct investments. Accordingly, foreign investors could capitalize by providing more substantial amounts of risk capital for oil & gas companies operating in China.
This bodes well for foreign oil & gas companies looking to do business here. Atherly confessed that a few such companies have already turned pessimistic and have stopped investing in China, but Leyshon Energy intends to stay patient and keep investing here for the time being.
"More risk may mean more failures, but it also means more opportunities for success," said Atherly.
To learn more about Leyshon Energy, link here:
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