Talent and experienceFebruary 10, 2017
TOGY talks to Jerry Jiang, Chairman of Geo-Jade Petroleum Corporation. Geo-Jade Petroleum Corporation is one of China’s largest privately owned E&P companies.
Established in 1984 under the name of Hainan Zhenghe Industrial Group, Geo-Jade Petroleum Corporation changed its name in 2014. The company was founded by entrepreneurs in China and originally conducted business in the real estate industry.
Geo-Jade began investing in the hydrocarbons industry in 2010 and currently operates exploration and production blocks in the Pre-Caspian and Chu-Sarysu basin, Kazakhstan with a total acreage of around 30,000 square kilometers. The company’s annual oil output is over 3.67 million barrels.
• On building infrastructure to meet demand: “We are working alongside two other listed companies in creating a blueprint for a full LNG value chain. We know that natural gas is cheapest in North America, but because of the backwards nature of the infrastructure for transportation at the ports it is very hard for North American gas to be exported. The Asian market has a very large appetite for LNG and natural gas and we are hoping to meet this demand and supply gap.”
• Planning for one belt one road: “As I mentioned, our focus is on Central Asia, China and North America because the people in our company are all oil experts who know where these rich reserves are. Furthermore, we want to do our search in accordance with the One Belt-One Road initiative and to place considerable emphasis on the safety of investments.”
Besides touching on these topics, TOGY talked at length with Jerry Jiang about the history of the company, its role as the only major privately owned oil and gas company in China, the overseas assets the country focuses on across the world and how the company hopes to pursue its acquisition strategy further in the wake of low oil prices. Most TOGY interviews are published exclusively on our business intelligence platform TOGYiN, but you can find the full interview with Jerry Jiang underneath.
Could you highlight the history and recent developments of Geo-Jade Petroleum Corporation?
Geo-Jade is a new company but the people that run the company are veterans from the big three national oil companies. They are all experts and talented people who left the big three and established this independent entity. Our company was listed on the Shanghai Stock Exchange in 1996. Our oil business started from December 2013.
We bought a real estate company from Hainan and reorganised the company into an oil and gas company and listed it. After we bought the real estate company we got rid of the assets unrelated to oil and converted the old shares into the current oil and gas shares. Our main focus is in crude oil production and exploration. Geo-Jade is firstly a crude oil production company. However, it is also engaged in independent exploration.
Can you discuss the experience that the veterans were able to lend to the company?
Though the history of the company is not long, the talent running the company brings rich experiences from the biggest national oil companies. For example, as of myself, I have more than 40 years of experience working in the oil and gas industry. I worked 18 years with China National Petroleum Corporation (CNPC), 10 years with China National Offshore Oil Corporation (CNOOC) and for the next 12 years I worked for an independent company.
What make’s Geo-Jade unique among China’s hydrocarbons companies?
We are the only independent oil company in China to purchase oil assets overseas at such a rate. On the main board, in shares, of the Chinese Stock Market, there are few oil companies, including CNPC, Sinopec, CNOOC, and us.
We are the first one that is a privately owned oil company. We have two reserves of talents: people who specialise in technical and industrial matters and people who specialise in finance and investment. Putting these talents together has allowed us to achieve this rapid development.
Geographically can you discuss where Geo-Jade concentrates its efforts?
Most of our company’s assets are located overseas. There are two reasons for this: the scarcity of oil and gas resources in China and policy limitations. That is why our strategy is to focus first on overseas and then on the internal market. We want to base ourselves overseas and then further figure out the domestic market. There are three geographical locations that are our strategic targets: Central Asia, China and North America.
However, we do not say no to other opportunities in other areas. We are also looking into possibilities in Southeast Asia, South America and Africa, but our first choice is to break into the Central Asian region, which we chose because they have abundant oil and gas reserves. Additionally, this geographic area is in accordance with both the Chinese One Belt, One Road initiative and the Chinese National Energy Strategy.
Are any of the areas in Central Asia particularly important to Geo-Jade’s future development? Where else are you concentrating your efforts?
In the past three years, we have chosen Kazakhstan and Albania as strategic locations for the launch of our production and strategy. We have two exploration projects and two development projects in Kazakhstan, one development project in Albania, all of which together account for more than USD 1.5 billion.
We also invested in the marketing budget in the North American market and we are now in the negotiation stage for some natural gas projects in Southeast Asia because we intend to concentrate on natural gas in Southeast Asia in the near future. Though we eventually plan to enter the Middle East, the environment there is not right for us at the moment for numerous reasons.
Which countries are you targeting in Southeast Asia?
We are looking at natural gas in Bangladesh, Burma and Thailand. On November 17, 2016 President, Xi Jinping, was in Ecuador for the American-Pacific Economic Co-operation meetings. I was also there on November 15, before the meetings to conduct an investigation as we are considering participating in a production project in Ecuador. Our goal is to give our company an annual production capacity of 5 million tonnes (nearly 35 million barrels) in the next two to three years.
At the same time, we are concentrating on our traditional strength, which is upstream exploration, while still keeping an eye on downstream developments. We are planning on purchasing a shipping company and are also looking at storage capacity, trading opportunities and some LNG access.
Can you discuss your works in North America and the challenges associated with working there?
We are working alongside two other listed companies in creating a blueprint for a full LNG value chain. We know that natural gas is cheapest in North America, but because of the backwardness of the infrastructure for transportation at the ports it is very hard for North American gas to be exported. The Asian market has a very large appetite for LNG and natural gas and we are hoping to meet this demand and supply the gap.
There are some problems that we need to solve before we can start trading North American gas to Asia, however. We have to figure out how to compress the natural gas and upgrade the port facilities to meet the needs of transporting this resource. That is just on the North American side. On the Chinese side, the three big companies still, to a great extent, monopolise LNG.
We need some policy changes in order to allow ourselves to do business in this area. Once these are in place we believe we will be able to construct some port facilities ourselves to get North American gas across the Pacific to China more efficiently. When this channel of trade is smooth we would be investing more into natural gas exploration in North America. Moreover, once this plan is realised the shortage of natural gas in China could be alleviated.
Because of the cost advantages of North American natural gas this is a very promising project. However, the investment will be very large and costly. That is why we have two partners and are taking on this plan together with them. Our plan for the future is for those projects that we have purchased to be in production.
We want to achieve better results from those projects and, at the same time, look into purchasing more quality assets. We hope that in China we can be a highly ranked private oil company after the big three.
What type of factors do you consider in your asset acquisition strategy?
The number one factor we consider is daily production, which should be 20,000-100,000 bopd. We are also only looking at traditional reserves, which must be big if we are going to pursue them. We are not looking at small pockets that are scattered. It has to be easily accessible on a large scale with quality oil.
We have a few points of criteria in our search. As I mentioned, our focus is on Central Asia, China and North America because the people in our company are all oil experts who know where these rich reserves are. Furthermore, we want to do our search in accordance with the One Belt-One Road initiative and to place considerable emphasis on the safety of investments.
Lastly, when we look for these rich reserves, we look at ones that have good infrastructure that are located in a favourable financial and taxation system and that have a full structure to support the oil and gas industry. In order to find these oil basins that meet our criteria, we rely on many recommendations from our friends in the industry.
We also work with financial intuitions and investment banks that approach us with projects that meet our criteria. They supply us with an asset profile, which is passed on to our team who evaluates and selects the location.
The downturn in oil prices seems to have been advantageous for you to pick up assets across the world with attractive prices. How do you expect this to change if the oil price ticks back up again?
The oil industry has its own cycle and we hit a very good point in that cycle. The oil prices will not remain low forever. Though there is ongoing research in renewable energy, many of these are still in the testing phase and there is no large-scale production of renewable resources to substitute for oil.
Therefore, for the time being, we still see a future in the oil industry. Right now, though, there is a very good opportunity for us to purchase our assets due to the low price of oil.
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