China's rapidly increasing thirst for oil has pushed prospectors into areas shunned by Western firms
31 August 2007
Hepeng Jia/ Beijing, China
China’s rapidly increasing thirst for oil has pushed prospectors into areas shunned by Western firms, with war-ravaged Somalia becoming the latest destination.
China National Offshore Oil Corporation (CNOOC), and a smaller group, China International Oil and Gas (CIOG), reached a deal with Somali energy minister Abdullahi Yusuf Mohamad in late June in Nairobi. The agreement gives the Somali government 51 per cent of oil revenues.
CNOOC’s bold move is not isolated. Last year, China, the world’s second largest oil importer, bought 145 million tonnes of oil from the international market, accounting for 43 per cent of its total consumption. The three Chinese oil giants - China National Petroleum Corp, Sinopec and CNOOC - have tapped into politically turbulent areas like Sudan and tribal regions of Ethiopia.
Sinochem Corp, traditionally a producer of downstream chemical products, reportedly started negotiation in March with the Houston-based US oil firm Devon to purchase the latter’s oil assets in Egypt. In December 2006, Chinese financial conglomerate CITIC Group purchased Canadian oil firm Nations Energy’s Karazhanbas oil field in Kazakhstan for around US$2 billion.
Ma Hong, a senior researcher of China University of Petroleum, told Chemistry World that Chinese oil companies are being forced into acquiring oil resources in risky regions. ’Most oil-rich areas have been monopolised by Western firms or their national oil companies. We have no other choices,’ Ma said.
Yin Xiaodong, an analyst with Beijing-based CITIC Securities, agrees. ’The purchases [by Chinese firms] in the hotspots are more noticeable, forming an image that Chinese companies tap oil everywhere.’ Yet according to a report released by London-based energy consultant Wood Mackenzie in late July, domestic oil exploration investments coming from CNPC, Sinopec and CNOOC were US$21.5 billion in 2006, far greater than their combined US$8 billion in 2005 and 2006 for overseas oil facilities.
Colin Fang, an analyst with Wood Mackenzie Beijing, says that a major factor pushing Chinese oil firms to tap oil assets abandoned or shunned by Western firms is their astonishing capacity to pump oil from seemingly lean wells. Daqing in northeastern China and Changqing in northwestern China have sustained high outputs after 40 years’ exploration. ’I think with experience and capacities accumulated from those "risky deals", Chinese oil companies have made a steady step in their global march,’ Yin said.