China Global Oil Shopping Spree

Source: Energy Tribune, Michael Economides and Xina Xie  (3/2/10)

"Last year, the country imported 50% of its oil for the first time."


While China has been praised by some Western politicians and pundits for the country's miniscule non-hydrocarbon activities, it is China's global pursuit of oil and gas that has grown to a crescendo. The Chinese refer to their recent purchases as global acquisition and diversification. But amidst the maelstrom of global warming rhetoric, their aggressive moves are getting precious little attention.

China's latest purchase came last month when PetroChina paid $1.7 billion to buy a 60% stake in a Canadian oil sands operation from Athabasca Oil Sands Corp. The production from the oil sands investment is expected to be as high as 500,000 barrels per day (bpd) under full development. The Canadian acquisition is among the latest in China's shopping spree for global oil and gas assets. And those purchases are further increasing the size of China's biggest oil companies—CNPC, Sinopec and CNOOC—which are now among the largest oil companies in the world.

China has seized the opportunity of the global economic crisis and the decline in oil prices to solidify its energy security. And it sees access to foreign oil as a crucial element of its economic future. Last year, the country imported 50% of its oil for the first time.

Further, in 2009, production by Chinese companies operating overseas oil and gas fields exceeded 800 million barrels (2.2 million bpd, ~57% of total imports). China has become the biggest buyer in the global oil and gas M&A market. Chinese companies announced 11 acquisitions with a total value of $16 billion.

To facilitate oil and gas imports, China is building pipelines. Under construction, or partial operation, are the China-Russia crude oil pipeline, China-Myanmar oil and gas pipelines and Central Asia gas pipelines. Clearly, China's building of the necessary infrastructure and its aggressive global acquisition spree is a deliberate effort to increase its energy security.