WATCHING THE WORLD NO MORE MAO SUITS FOR CHINA'S OILMEN

The evolution of Fortune Oil plc, London, required, as the name suggests, an element of good luck.

The story involves a small U.K. onshore exploration and production company that suddenly became a pioneer in China.

Until last year, Blackland Oil plc produced about 100 b/d of oil from small fields near Lincoln, U.K. At that time, Kingsleigh Petroleum Ltd. was a Hong Kong company trading refined products in China and Southeast Asia.

Kingsleigh founder Daniel Chiu had built a chain of business contacts in China since the early 1980s and wanted to raise money for investment in Chinese infrastructure projects. However, Blackland had something Kingsleigh coveted: a quotation on the unlisted securities market (USM) in London's Stock Exchange.

"Blackland was not large enough to make use of its USM quotation," said Rupert Lycett Green, U.K. operations manager at Fortune. "What brought the two companies together was Kingsleigh's desire to get a London quotation."

REVERSE TAKEOVER

Green explained that the easiest way for a Hong Kong company to get a USM quotation is through a shell company. So Kingsleigh proposed a reverse takeover of Blackland, from which Fortune would be created. "When the project was put to us, we were very excited," said Green, once chairman and managing director of Blackland. "With this proposal, everyone was a winner."

Now, Fortune is involved in a number of projects that are coming into operation. These include a liquefied petroleum gas plant, a single point mooring terminal feeding China's Maoming refinery, and construction of a residual fluid catalytic cracker at the refinery (OGJ, Aug. 15, p. 42).

"China wants western capital and technology," said John Mottram, finance director at Fortune. "The Chinese wouldn't have come to Fortune if they had their own capital."

Mottram said that after the Bamboo Curtain was lifted in 1978, Chinese officials attended business meetings dressed in Mao suits and lectured Westerners on China's state controlled economy.

WESTERN WAYS

"The early years of business with China were like the Russian situation today," Mottram said. "This has now passed. China's businessmen are very pragmatic and sophisticated. They understand western ways."

Daniel Chiu, Hong Kong based chief executive of Fortune, said recently, "Good connections are very important in China. Without them, outsiders have a hard time getting business."

China's absorption of western ideas means a good price is increasingly recognized as more important than good connections in awarding contracts.

However, Chiu's groundwork gave Fortune a head start and led to Maoming Petrochemical Corp, (MPC), the state concern running the Maoming refinery, taking a 2.63% stake in Fortune Oil. Three other state concerns also hold 2.63% each.

"Contacts are no longer all in China," Mottram said, "but Chinese ownership helps. While state control of China's oil industry is still strong, involvement of MPC will help ensure the success of Fortune."