SINGAPORE/BEIJING: China is set to ramp up acquisitions of overseas oil and gas companies to feed its soaring growth in energy demand as the country overtakes the United States as the world’s top net oil importer.
Decades of breakneck economic growth pushed China to the top ranking in September, the US Energy Information Administration (EIA) said in a report this week, a position it is set to keep through 2014.
China, already the world’s top importer of a number of commodities, has led worldwide oil demand growth for a good part of the past decade, keeping oil prices elevated even as weak Western economies and rising shale output in the United States reduce global consumption.
The long-expected shift may further strengthen China’s position in oil markets as East Asia exerts an increasing influence in global trade. “Growing imports is going to be a driver for acquisitions,” said Alex Yap, an energy consultant at FGE in Singapore. “From a nation’s point of view, they have a supply security agenda, but from the view of Chinese companies, they are interested to grow themselves into empires.”
Difficulties in boosting domestic output have led Chinese companies, including China National Offshore Oil Co (CNOOC) and Sinopec, to spend more than $100 billion since 2009 on oil and gas assets to boost imports, Thomson Reuters data shows.
CNOOC aims to double its annual oil and gas output to 120 million tonnes of oil equivalent from 60 million tonnes, or 2.6 million barrels per day, by 2020 and to 180 million tonnes by 2030.
Beijing has also spent billions via subsidised lending and aid to secure oil and gas in Africa and South America. While China does not bring all the oil from its overseas assets back home, access to the fields gives Beijing security of supplies and allows it to better plan its import targets.
“State traders Unipec and Chinaoil are trading more in the global market than the amount they purchase for domestic refining needs,” said a trading official familiar with China’s crude oil procurement strategies.
“When making overseas acquisitions, they sometimes build refineries as a back-up to secure oil and gas blocks, allowing them flexibility to take either crude oil or refined fuel, or engage in a series of swap deals.”
The EIA figures show that China’s oil consumption outstripped its output by 6.3 million barrels per day (b/d) in September, implying the difference is import demand. The equivalent US gap was 6.13m b/d.
The drop in US dependence on foreign oil has come from several fronts. New technologies such as hydraulic fracturing, or fracking, have led to a boom in oil production that has reversed a decades-long slide in U.S. output.
US output has jumped by 2.8m b/d since 2008, recently topping 7.8m b/d, a level not seen since 1989, according to EIA data. Imports of foreign crude have correspondingly dropped off.
Reuters
