Copyright The Financial Times
By the grey standards of China’s government-appointed chief executives, Fu Chengyu has some odd habits.
“People in China think I am strange because I do not drink tea. I like coffee,” says the CEO of state-controlled China National Offshore Oil Corporation in an interview. This week, the 54-year-old did something even more maverick than shunning China’s traditional national drink. After consuming many cups of coffee in an all-night board meeting, Mr Fu launched a Dollars 19.6bn (Pounds 10.7bn) unsolicited bid for Unocal, pitting CNOOC against Chevron, the US oil major, and incurring the wrath of US politicians.
Mr Fu is the public face of the most ambitious and costly attempt by a Chinese company to buy a US rival against its will. Success would see him hailed as a hero in his home country and as a visionary by international capital markets. Failure could trigger a damaging row with the US and deal a severe blow to China’s desire to play a more prominent role on the world’s capital and energy markets.
Mr Fu, a CNOOC lifer who joined the company when it was founded in 1982, rejects suggestions that this is a historic moment in China’s transition from command to market economy. “This is not a pioneer transaction. That is a common view from those who are outside China,” he says.
“People inside the country have been taught more about globalisation than people in other countries.”
Throughout his two years at CNOOC’s helm, Mr Fu, a tall, square-jawed man with a sartorial sense unknown among fellow Chinese captains of industry, has striven to portray an image of self-confidence. Acquaintances describe a non-smoking, non-drinking workaholic with an international outlook. Mr Fu is proud of his unorthodox corporate upbringing, in which he rose, not through the Communist party ranks as is the norm in China, but from the grassroots as an oil engineer – first in China and then in the US. He obtained a masters’ degree in petroleum engineering at the University of Southern California in 1986. He says the spell abroad and 14 years spent managing Sino-foreign energy joint ventures, including one with Chevron, still informs his management style.
“Those experiences made me understand more and more the international oil industry and the importance of international capital markets,” he says. “We are not really like other Chinese companies. Our systems, models and processes are more like our western counterparts.”
Yet, in many ways, Mr Fu is a son of China’s recent troubled history. Part of a generation who grew up during the chaos of the 1966-76 cultural revolution, he spent his formative years in a country whose education systems and social fabric were struggling to recover from the aftershocks of Mao Zedong’s misguided policies. The experience was not entirely negative: many China watchers maintain that those barren years spawned business leaders who are more aggressive and more willing to take risks because of their desire to make up for lost opportunities.
Mr Fu, who played basketball and football at university but now lists his three main hobbies as “work, work and work”, fits that description. Although he is charming on a personal level, colleagues and shareholders have experienced his aggressive and secretive streak. Mr Fu was left seething when, last March, CNOOC’s non-executive independent directors’ rejected his first attempt to bid for Unocal and accused him of not giving them enough time to consider the deal. And when China’s state-owned Assets Supervision and Administration Commission, the top regulator of state enterprises, asked CNOOC’s foreign partners to rate it in January, criticisms included its poor communication with external stakeholders.
Mr Fu’s silence in the six months since the Financial Times revealed CNOOC’s interest in Unocal was further ammunition for those who accuse him of paying scant regard to the rights of shareholders other than the government. Few, however, doubt Mr Fu’s drive to make his mark in the corporate world in China and beyond. In a letter to investors in February, he promised “volumetric growth” for CNOOC’s businesses in years to come, adding that “nothing may stop our future growth”. He is equally bullish about the Unocal takeÂ over. “This is just about the growth of the company. I have been here 23 years but I have to lay the solid foundations for the next 20 years,” he says.
Although his recent track record is strong – net profit grew 40 per cent last year and CNOOC’s Hong Kong-listed share price rose 50 per cent – some critics say this may have had more to do with high oil prices than with Mr Fu’s management. Indeed, some doubt whether he has what it takes to handle the Unocal deal, given his lack of experience in takeover battles, or to manage a global oil company.
Mr Fu remains a government appointee. Having won approval from the authorities for the bid after selling the deal as an answer to China’s thirst for energy, Mr Fu will be under pressure to deliver. “He may have made the case that the gas would be available by acquiring Unocal, but still, spending Dollars 19.6bn is a pretty big leap,” says a foreign energy executive.
Mr Fu has been praised in the Chinese media for CNOOC’s takeover bid but the tide could turn if the acquisition turns sour. “There are a lot of people in China who think that Unocal is not worth that kind of money and there will be a lot of finger-pointing at him if it doesn’t work,” says a China-based industry observer. Mr Fu appears painfully aware of the challenge he faces. When asked about the likely US political backlash to CNOOC’s takeover, his patience appears to run out. “There is nothing threatening US national security,” he says, raising his voice for the first time in the interview. “We can secure jobs in the US, we will sell the (US-produced) oil and gas in the US. I do not see how this harms the US.”
Mr Fu will need more than strong words to persuade the members of Congress and the senators lining up to lambaste the “Chinese takeover” of national oil assets. Caught between his political masters, foreign shareholders and blood-thirsty politicians, his plan and his personal ambition will be put to the test. If Mr Fu’s parting shot is anything to go by, though, Chevron, Unocal and the Hill may have found their match. “We are deadly serious to do this deal,” he says.
Additional reporting by Joe Leahy, Enid Tsui and Richard McGregor