Energy & Resources

Not so bright

China’s only private sector oil baron goes under


Xue: same fate as Cliff Barnes?

For WiC readers of a certain vintage, there really are only two oilmen worthy of note: JR Ewing and Cliff Barnes. The two Texans spent much of the final quarter of the twentieth century slugging it out on primetime TV.

Cliff Barnes was the perennial loser in his oil-obsessed feuds with his hated brother-in-law (sadly, Ken Kercheval, the actor who played him in Dallas, died last week).

But it seems his characterisation in the fictional show lives on through a real world counterpart. And he hails from China.

The latter is a country where American-style, freewheeling, cigar-chomping, bourbon-chasing oil barons are pretty thin on the ground. The industry is instead dominated by a trio of state-owned heavyweights, or the ‘three barrels of oil’, to use their local monicker (they are CNOOC, PetroChina, Sinopec).

In fact, as we wrote in WiC111, there has only ever been one private sector oil magnate. His name is Xue Guanglin, also known in Cantonese as Sit Kwong-lam, the founder of Hong Kong-listed Brightoil.

Xue shares a number of attributes with Barnes. For starters, both men know what it is to dream big, achieve success, miscalculate and then lose it all. Back in 2010, Xue was one of China’s richest men, worth Rmb19.75 billion ($2.93 billion). Yet this month, Xue was declared bankrupt by the Hong Kong courts. However, in the kind of fighting spirit that would have made Barnes proud, he is refusing to take his defeat lying down.

The court adjudicated on behalf of Vietnam’s state-owned oil company Petrolimex, which is owed $30.25 million. Xue personally guaranteed the debt and the default has also triggered his removal as Brightoil’s chairman and executive director.

Xue says he is appealing the verdict and aims to be reinstated as chairman. But in many ways this situation is just the latest misfortune to strike him ever since Brightoil’s shares were suspended from trading in October 2017 – when the company was unable to file its financial reports to regulators as required.

Things started to go wrong when he decided to vertically integrate his oil trading business. In early 2014, he spent $1.046 billion moving upstream by purchasing Anadarko’s Chinese unit. His timing could not have been worse. That June, oil prices hit $115 a barrel. Only 18 months later, they fell below $35. Brightoil’s profits collapsed and its debts became unsustainable.

It hasn’t released financial results since 2017, but it recently said that had it done so, it would have recorded a HK$452 million ($57.6 million) net loss during the last six months of 2018. Its debts amount to roughly $1.9 billion, although Caixin says CNOOC handed Brightoil a $700 million lifeline at the turn of the year.

Over the past few years, Xue has also been trying to diversify into the new economy, launching China’s first internet petroleum finance platform. This allows users to buy oil online and then store it – for car owners this offers a hedge against petrol pump prices.

However, it appears that Xue’s star has well and truly waned on the mainland. In a rather stinging profile, Sina Finance quoted a former employee who recalled that Tencent’s Pony Ma took one look at the platform and didn’t think it was good enough.

The news service also suggests that while vision and persistence paid off when Xue first entered the oil business, luck played a large part in his rise too. It highlights as well how his ferocious work ethic makes him extremely unpopular with managers, who resent having to attend meetings in the middle of the night.

Xue rarely gives interviews and has a reputation for secrecy. His company’s Hong Kong flotation, for example, was structured as a backdoor listing. It has also never been clear how he gained a coveted oil trading license in 1992 after arriving in Shenzhen with just Rmb2,000 in his pocket. Before that he studied philosophy in Nanjing and today there is a university building there named after him. But he wouldn’t likely react ‘philosophically’ to one of JR Ewing’s most famous put-downs to Barnes: “I’m surprised you’re not a better loser after all the experience you’ve had.”

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