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China’s Oil Syndrome and Oil Debate

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China’s Oil Syndrome and Oil Debate
Article by Davis Smith

China’s early entrance into the international petroleum market began as net importer of oil in 1993 and is currently importing over 7.4 Million barrels day making news by surpassing the US.   The shift has been swift. China used only half as much energy as the United States in 2000. Nine years later, it surpassed the US as the world’s biggest energy user and is now the No. 1 oil global importer.

Recently, in 2011, China imported over half 58% of it’s oil requirements, most estimates project China will import 75% it’s oil by 2030. 

China’s population at nearly 1.4 Billion people has a massive demand for oil and will continue to grow. China now imports from Oman, UAE, Angola, Venezuela. Russia and Iraq.

China’s oil industry is dominated by it’s (State Owned) oil companies the 3 major players are (CNNOOC) China National Offshore Oil Corp, China National Petroleum and Sinopec.

China strategic purchase of 1% of BP and signing a 30 year gas and pipeline deal from Russia.  China will have 100 shale gas rigs operating within the next two years in the Western part of China.

US sanctions on Iran have made China receiving less crude shipments from Libya and Sudan.   They have invested heavily in Canada.

In 2010, Chinese oil and gas companies alone represented about 20% of global merger and acquisition activity in the sector, and both PetroChina and Sinopec planned on spending upward of $36 billion that year on exploration and production investments. CNOOC said at the time it planned on topping the $10 billion it had spent the year before.

But five years later, it’s a different story. PetroChina is cutting its capital expenditures budget 9% this year from $47 billion to $43 billion, three-quarters of which will be maintenance capex only. Sinopec is cutting its capex budget to $22 billion, a 12% decline from last year, and in February CNOOC said it would reduce capex spending some 26% to 35% this year, the first time in five years that it has reduced this budget item. China National Petroleum declared it is undertaking “revolutionary measures” to cut costs.

The old rule of thumb was that a $US10 a barrel increase in oil prices shaved about 0.6 percentage points off global GDP and about 0.8 percentage points of US GDP. On that basis, it would have wiped about 3 per cent off global growth over the past four years and 4 per cent off US GDP.
Yet, until very recently, the US and global economies have been growing quite strongly, partly as a result of the China Syndrome and its interaction with low interest rates, tax cuts and the housing booms in some of the major Western economies.

To escape the losses, the Chinese oil majors are looking to restructure their businesses to minimize further pain.

Whether the price of oil can change China’s oil industry and it’s requirements, It’s all part of the China Syndrome and oil debate

Davis Smith – OilfieldFamilies.com Contributor
International Oil & Gas Contract Writer
Connect with Davis Smith on LinkedIn


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Comment(0)

  1. So? Not sure how this affects us oilfield workers here in the U.S. if China imports more oil than the U.S. Isn’t that because we as we all know, we are producing more of our own oil to meet our needs.

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