April 14, 2021

Market Spotlight: How to power the world's economic powerhouse in APAC

By Desmond Chua, Head of Region, APAC, Datasite

 

In the wake of the COVID-19 pandemic, China has firmly cemented itself (again) as the world’s pre-eminent growth engine. Strict virus containment measures implemented early in the crisis precipitated a rapid and more robust recovery in Chinese consumer activity late in 2020, as well as a marked rebound in demand for energy and natural resources.

How China’s energy market evolves in the years to come as its economy continues to mature will be critically important not only for the country itself, but for all of APAC.

Bearing this in mind, the clutch of deals announced in late July involving China Oil & Gas Pipeline Network Corporation (PipeChina), a state-owned enterprise formed in December 2019, may reveal much about the country’s energy future.

As highlighted in our new Deal Drivers: APAC FY 2020 report, China was behind five of APAC’s biggest energy, mining & utilities (EMU) deals in 2020.

Consolidating major state energy assets

The largest EMU deal, and the biggest deal in APAC across all sectors in 2020, was the above-named PipeChina acquisition of more than a dozen major oil and gas pipeline assets from PetroChina for almost US$50bn.

The transactions saw PipeChina acquire a cornucopia of pipelines and storage facilities from PetroChina and Sinopec, also state-owned energy companies. The incredible extent of this industry restructuring augurs well for future spin-offs of pipeline assets.

After its quartet of purchases in July, PipeChina went on to make another multibillion-dollar acquisition only a few months later, this time involving Hong Kong-listed Kunlun Energy, as it continued to consolidate ownership of crucial midstream oil and gas infrastructure. By that time, hundreds of companies had already registered for shipping licenses allowing them to use the companies’ pipelines and liquid natural gas terminals.

Natural gas to power the future

Looking ahead, it is clear that natural gas will play a large role in China’s future. The state has said it intends for the economy to become carbon neutral by 2060, with natural gas a key element of plans to mitigate air pollution and wean the country off coal.

Being mindful of this, reforms to improve the competitiveness of China’s gas and cleaner-energy markets and promote investment, such as the development of PipeChina, will in all likelihood become more and more frequent.

Deal Drivers: APAC FY 2020

What other APAC M&A deals made the headlines last year? Which sectors and countries saw the top bidders and values? Where do the opportunities lie going forward?

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If you'd like to see how M&A has fared around the world, check out our other Deal Drivers reports from EMEA, APAC, and the Americas to gain the latest insight into dealmaking.

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