The Ashes

Technology, Science and other news
August 20, 2009

China On A Shopping Spree for Oil

Posted by : admin
Filed under : General

The Chinese are purchasing oil fields across the world in an attempt to rival the major oil companies, such as, ExxonMobil, Royal Dutch Shell and Chevron.

china-oil

Chinese oil consumption is expected to grow by 20% in the next 6 years, and the country already imports more than half of what they currently consume.

The firms are taking a couple of steps toward getting a solid foothold in the market, such as extending loans to foreign companies. Rosneft, a Russian company, has made a deal with China to accept a $10 million loan in exchange for a percentage of the company’s output. Also, Petrobras (Brazil) has worked out a similar deal with China. Currently Petrobras is creating a new major oil field just off the coast.

In addition to extending loans to foreign oil companies, China has also expressed an interest in purchasing either part of Argentina’s YPF or the whole company for $14.5 billion, although the deal is far from set in stone. There is also speculation afoot that China may be looking to purchase a majority of the Rumaila oilfield in Iraq, a field that produces over 1 million barrels of oil each day, from BP.

There are several different reasons that China has been making moves to gain more control in the oil production business. First, China has managed to accumulate a large amount of cash. There is speculation that the unbridled spending from the United States government will have a serious negative pact on the value of the cash, so China is attempting to purchase these stakes in order to diversify their portfolios quickly without causing further destabilization of the US dollar.

Another reason that China has been making purchases is that they do not have much faith in free market economies, spurred by their failed attempt to purchase Unocal.

Currently, China imports over half of the oil used in their country, and they project oil consumption to grow by almost 20% in the next six years.

As for being a rival to western companies, China National Petroleum Corporation already has a production rate that is nearly equal to that of Exxon. With a growing stake in worldwide production, China is poised to be a serious contender in the global market.

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