Investment by Chinese seen as emerging investment and trade option, but not a short-term focus
by Derek Sankey
When the financial results started rolling out for Chinese oil companies this year, it was a direct reflection of the fact that China’s demand for oil jumped 13 per cent in March from a year earlier as the Chinese economy roared to life – again – after the impact of the global recession began to subside.
PetroChina Ltd., Asia’s largest oil producer, increased by 71 per cent in the first quarter. China Petroleum and Chemical Corp. (or Sinopec), the nation’s largest refiner, reported that its profit more than doubled last year.
Wang Xinhua, CFO of Sinopec, commented in the company’s first quarter results that “the demand for natural gas, oil and chemical products grew steadily and the company took various proactive measures to expand the market and optimize the product mix.”
China’s recent investments in the oilsands is motivated by a near-term investment strategy, but ultimately serves as a way for the energy-hungry nation to secure long-term potential supplies to quench its growing thirst for oil.
“While it would be interesting for them to have access – more access … they really do understand that it’s got to make economic sense for that to happen because they’re in it for the investment first and then the oil afterward,” says Greg Stringham, spokesman for the Canadian Association of Petroleum Producers (CAPP). It’s a mutually beneficial investment as producers begin to look in a more meaningful way to markets beyond the U.S.
“As we take a look at the development of the oilsands, we do see over the longer period of time, continued growth in the oilsands, which will require that to be able to find its way to market,” says Stringham.
With several recent major pipeline expansions announced to the U.S. markets – the Clipper, the Keystone – Canadian producers appear to have their short-term sights set on opening up further American markets. “Companies are all about the options for their markets, so (China) is certainly in their thinking, but the current actions in the immediate term have been to build the Clipper and the Keystone pipelines to penetrate deeper into the multiple markets into the U.S.,” says Stringham. Still, it’s hard to ignore the China factor.
With about 170 billion barrels of established reserves, Alberta’s northern oilsands region is also a resource that has gained an increasing amount of international investment and attention, including from the Chinese.
“The West Coast and the Asian market has always been one that we’ve been looking at and that the Asian customers have been looking at … because of our strong supply,” says Stringham. There is already an existing, limited outlet to Asian markets through Kinder Morgan’s facilities in Vancouver, but it is a drop in the bucket to what is being planned by some Canadian companies when it comes to a long-term export market abroad.
Click here for part 2 of the article. |
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