Fu Chengyu, chairman of Cnooc, China’s largest offshore oil and gas producer, is not one to shy away from a deal: he spearheaded one of China’s earliest and most aggressive bids in the oil industry, when Cnooc offered to acquire US-based Unocal for $18.5bn in 2005.
That deal was crucial in testing the waters as China began its relentless march of overseas investments. Not only did it push the limits of US tolerance for Chinese acquisitions on home soil, but, as the biggest Chinese overseas investment at the time, it also signalled a pivotal shift in Beijing’s thinking. All large overseas deals by Chinese companies must be approved by state regulators, which was not easy five years ago. “The hardest part of that deal was convincing the government,” jokes one Cnooc insider.
The man spearheading the deal was an unlikely visionary. Born in 1951, Mr Fu grew up studying hard and with a natural affinity for sports, playing basketball and football at university as he earned his degree in geology. His bushy eyebrows and forthright demeanour made him something of a rarity among the country’s captains of industry when he was eventually appointed as chairman of China National Offshore Oil Corporation in 2003.
If Mr Fu was unusual, so was Cnooc. Created in 1982 by the state, its job was to develop offshore oilfields. At the time, it lacked the experience to manage these fields independently, so joint ventures with foreign partners were necessary from day one.
As a result, Mr Fu and his colleagues gained exposure to working with foreign oil companies from the very start of China’s opening-up to the west. The country’s other oil majors, Sinopec and CNPC, were much slower to start exploring foreign joint ventures.
For that reason, Cnooc has never quite been a typical Chinese state-owned enterprise, even if the parent company is still majority owned by the state. It has truly independent board members, for example – famously they initially rejected Mr Fu’s proposal to bid for Unocal.
The challenge that faced the chairman, however, was convincing the world of Cnooc’s uniqueness as he set out to acquire Unocal. “We are not really like other Chinese companies. Our systems, models and processes are more like our western counterparts,” he told the FT in an interview in 2005.
Although he belatedly launched a media campaign to accompany the move for Unocal, the bid ran into strong opposition from US politicians and eventually failed. Such public rejection stung, not just for Mr Fu but also for policy chiefs in Beijing and leaders of state-owned enterprises. It was five years before Cnooc ventured to invest in US onshore oil and gas again, even as it snapped up other assets around the world.
Mr Fu is nearing retirement age and has long been rumoured to be preparing for a move into politics. Last year, he stepped down as chief executive of Cnooc but retained his title as chairman – a move that paves the way for a younger generation of Cnooc leaders.
“We learned we need to be more prudent in terms of public relations and political lobbying when dealing with such a big deal,” Mr Fu said in an interview after the Unocal deal failed. That is a lesson that Chinese companies across all industries – from Huawei and Lenovo to Chinalco – are still grappling with today.