China On A Shopping Trip

The following is from an article in the Danish Information written by Jørgen Steen Nielsen (translated into Norwegian by Lars Nygaard for Klassekampen.

China oil companies are buying oil fields and competitors across the world. China is preparing for a world with dwindling fossil fuel supplies, rising prices and a lack of oil, gas and coal reserves. Many years will have passed before China’s renewable energy will be sufficient and although China has its own oil, gas and coal production, import is increasing.

While worldwide oil production has not grown noticeably in the last five years, China’s portion of global energy use has increased from 6.4 to 10.4 per cent in ten years. Only the U.S. uses more oil than China. The Chinese are preparing for the coming crisis in energy supplies by buying what they can.

Along with oil by the barrel, China is buying oil companies and oil fields. While the U.S. is trying to establish access to strategic oil sources (think invasion of Iraq), China has more than 2.5 trillion dollars in reserve which verily begs to be used for foreign purchases. Profit resulting from purchases is not necessarily the only desired objective (as it would be in the West where the investors’ return is paramount and makes strategy into a short term myopic affair) because the Chinese state stands behind the state’s enterprises who are making the purchases also in pursuit of security and foreign policy.

China gets most of its imported oil from Saudi Arabia, Iran and Angola. The Chinese have, to ‘everyone’s’ irritation, invested in Iran’s oil and gas industry (oil fields, pipelines and refineries) despite sanctions. This activity has been made possible by the West’s sanctions, which have resulted in access not cluttered up by other foreign competitors.

Ironically, China may now be reducing its activities in Iran as a result of the U.S. possibly allowing China access to its energy sector in return for said decrease in activities in Iran. So China initially avails itself of the opportunities which appeared in the wake of Western sanctions of Iran and then uses its increased presence in Iran as a way of achieving entrance into the U.S. energy sector.

China leads by 2 – 0.

After facing Congressional criticism for an attempt by CNOOC (China National Offshore Oil Corporation) to purchase Unocal, China has retooled its strategy. For example, CNOOC bought 33 percent of a Texas oil company, Chesapeake, pursuing discrete purchases of minority positions. And securing a foothold in the U.S. market and along with ‘legalized industrial espionage’ in the form of increased competence and experience.

In August 2009 PetroChina bought 60 percent of Canadian oil company’s oil sands projects. And in March 2010 Sinopec bought 9 percent Canadian oil sand company Syncrude.

Such purchases are not limited to North America. In March CNOOC bought a stake in Argentinean Bridas which allows China access to substantial oil reserves.

In May Sinochem bought 40 percent of the Brazilian Pelegrino oil field from Norwegian Statoil.
That purchase was preceded by purchase the year before of the English company Emerald Energy in order to obtain the company’s oil fields in Colombia.

Africa is certainly not outside of China’s strategic vision. Nor are Central Asia or the Middle East. Sinopec, for example, bought up the Swiss-based oil company Addax Petroleum which has either existing or new oil fields in Nigeria, Cameroon, Gabon, together with fields in Iraqi Kurdistan where it is said there are large oil reserves.

Many countries and companies look favorable on Chinese purchases as such benefits as Chinese investment in infrastructure often follow.

It would seem that the West with its short-term profit needs and desire to throw around military might is losing a battle for future access to energy supplies. So called free marketeers who decry involvement of the state in matters economical may soon be holding out a tattered top hat begging the Chinese for a few drops of the world’s remaining oil. In today’s hysterical prioritization of the stockholder/CEO bonus, the market is simply incapable of planning or strategic thinking, seemingly, of any sort. This last paragraph is LSW opinion.

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