The race to secure natural resources is intensifying. Particularly amongst governments and nationally-sponsored corporations. And particularly in Asia.
We’ve been seeing signs the last few years that Asian nations are stepping up their drive for oil, copper, iron and natural gas. I talked last week about India jumping into the fray in a big way for coal.
A few more indicators this week worth mentioning. Korea is upping the ante.
Korea National Oil Corp (KNOC) leaked this week that it will sell between $500 million and $1 billion worth of bonds to fund its $2.6 billion hostile takeover of Africa/North Sea-focused Dana Petroleum.
The same day, the world's second biggest smelter, LS-Nikko announced a joint venture with Korea's top steelmaker, Posco. Under the deal, the two majors will work together on the acquisition and development of copper and iron ore projects.
These are deals of mega-proportions. So much so, the Korean government said it fears currency appreciation because of state-associated firms issuing billions in new won-denominated debt.
Not to be outdone, Japan also announced some ambitious natural resource plans this week. Tokyo Electric Power Company (Tepco) said it is aiming to take more ownership in liquefied natural gas projects around the globe.
Tepco currently sources 11% of its LNG supplies from projects in which it owns equity. Mainly Australia's Darwin LNG facility. The company said it wants to grow this to 33% equity supply by 2020.
This is a big jump in supply. Meaning Tepco is going to have to be fairly aggressive in pursuing buy-in on new projects.
With all these plans on the books, deep-pocketed Asian governments are going to be increasingly butting heads with regular corporations as well as each other when it comes to buying resource projects. A lot of cash is being brought to bear on the sector in a great game of "chicken", with significant implications for project valuations.
The Asian slant means projects within shipping distance of the East are going to be in demand. Pick your investment spots wisely.
By. Dave Forest of Notela Resources