Chinese are finding a way to double up on exposure to the US shale oil boom, with property-focused investors buying up homes built for workers as energy companies move into the sector.
“Shale drilling is the main driver of Chinese companies’ investment into property [in the US resources sector],” said Charlie Rosier, director of Blackfish, a Hong Kong-based firm focusing on United States property investment.
As Chinese entities pour money into shale oil projects in the US, complementary investment into workers’ housing that supports these projects offers lucrative yields, said Rosier, who identifies the investment hot spots as Texas, North Dakota and Pennsylvania.
He said US companies often lacked the funds to set up the infrastructure for drilling operations. “Chinese firms provide this capital,” he said.
Just as Chinese energy companies are providing capital for the shale oil projects, property investors are drawn to the flow-on opportunities.
“Investment around this sector has surged. Housing has seen rapid growth as migrant workers relocate in search of better employment prospects,” Rosier said.
Sinochem is among the Chinese companies moving into the US shale gas industry. Last year it bought a 40 per cent stake in the 84,000 hectare Wolfcamp Shale project in Texas for US$1.7 billion.
One US real estate developer seeking to draw Chinese investment into the US shale oil boom is North Dakota Developments, based in the northern state that has prospered due to shale oil.
North Dakota Developments sells properties to investors in mainland China and Hong Kong through direct sales or agents, said Robert Gavin, its founding chief executive. “Sales have grown, especially now that we have offices in Shanghai and Beijing.”
The company has in recent months generated sales of US$1 million to US$2 million from Chinese clients, said Gavin, the majority owner of the firm. “We intend to open an office in Hong Kong shortly, once we expect to increase sales from Chinese investors by 50 per cent year on year over the next five years.”
The shale oil boom in North Dakota started in 2007, and has grown into a major industry, said Alvin Wang, Singapore manager of North Dakota Developments. Since the boom, tens of thousands of workers have come from all over the US to North Dakota because the oil sector there pays high salaries, Wang said.