China’s Conquest for Oil

By BERC China Focus

By Sylvia Qi

With its high demand for energy, China has become the largest importer of oil as of the end of last year according to the US Energy Information Administration (EIA).

Source: U.S. Energy Information Administration Today in Energy, MAR 24, 2014. Note: Net oil imports are defined as total liquid fuels consumption less domestic production.

In Brazil, Chinese oil companies CNOOC Ltd. and China National Petroleum Corp. were among the winners of the recent auction for the Libria field with each company securing a 10% stake. Libra is estimated to hold about 12 billion barrels, and may become one of the world’s largest deep-water fields. The companies will be working in partnership with Petroleo Brasilerio SA  as the Chinese companies have less experience in deep-water drilling.

China and Alberta have joined in an energy pact that increases trade ties.  This agreement provides China access to Alberta’s oil reserves.  Canada also benefits from the deal. “It doesn’t matter where our crude goes, but if Canada and Alberta has more access to more markets — especially tide water markets like Asia — that will help improve our price locally, no matter where we sell our crude so it’s very important,” states Gordon Holden, chief operating officer of Calgary-based Surmont Energy.  China has a great stake in Canadian oil.  Currently, Sinopec is seeking a partner for the development of shale oil.

China is also trying to acquire more oil from Africa. Contracts worth $1.7 billion have been signed between China and Tanzania, which include investment in power plants. A $1.2 billion natural gas pipeline from the south east of the country to the capital Dar es Salaam is also being financed by China. Tanzania has recently made discoveries of natural gas off its southern coast.  According to the country’s energy minister, Chinese companies are expecting to bid for oil and gas blocks in the country.

As China becoming the largest importer of oil, the problems associated with this black resource are going to play significant roles in China’s future. As seen from the quest for oil in recent years, China has put enormous efforts in diversifying the sources and securing the trade channels. While environmental degradation and air pollution drove by fossil fuel burning had become so severe that the people’s daily living and appearance of cities are transformed, energy security issue emerges to be another major issue on China’s agenda if it isn’t already.