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China’s oil juggernaut

From Texas to Sudan, China is snatching up oil fields. But will it play fair on the global market?

Oil, China
Oil on a firefighter's shoes after Chinese firemen extinguished a blaze at a port in Dalian, where an oil pipeline exploded, July 18, 2010. (Stringer/AFP/Getty Images)

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LONDON, United Kingdom — In 2005, China's state-run CNOOC oil company triggered a storm of protest in the United States by trying to purchase America's now-defunct Unocal Corporation. That $18.5 billion deal collapsed over U.S. security concerns.

Undeterred, CNOOC returned to the U.S. this year and, with relatively little fuss, made a $1.1 billion offer for a stake in 600,000 acres of southern Texas oil and gas fields.

The Texas acquisition is part of China’s staggering global fossil fuel investment spree this year, which has also seen it snap up concessions in Argentina, Canada and Africa. Just this week, Beijing-based Sinopec, Asia's biggest refiner, agreed to buy all of Occidental Petroleum's oil and gas assets in Argentina for $2.45 billion, bringing Chinese bids for overseas energy assets to a record $38.8 billion this year.

The amount of money spent and the communist country's quiet tenacity in seeking out new supplies, often in the face of local hostility, are a firm reminder that China is thirsty for oil, and getting thirstier by the day.

Thanks to a booming economy, China is now the planet's leading consumer of energy. The 2.25 billion tons of oil it guzzled last year easily surpassed America's 2.17 billion tons.

The Texas deal, seen as a possible precursor to further investment in the U.S., has yet to be approved. First, the Committee on Foreign Investment will decide whether CNOOC's investments in Iran contravene U.S. sanctions laws.

Reports, however, say the investment is unlikely to meet opposition.

To allay concerns, the state-run China Daily recently quoted Zhang Fan, an American studies researcher, saying the deal will "benefit both sides and should not be viewed as a threat to U.S. oil security."

But at a time of uncertainty over conflicts in the South China Sea and Korean peninsula, does China’s aggressive acquisition of the world's dwindling oil reserves pose a security threat to the United States and its allies?

“It is hard to overstate the growing importance of China in global energy," said Nobuo Tanaka, the executive director of the International Energy Agency, a key international oil security organization that China has refused to join.

"How [China] responds to the threats to global energy security and climate posed by rising fossil-fuel use will have far-reaching consequences for the rest of the world."

Chinese President Hu Jintao last year pledged to curb his country's fossil fuel consumption by seeking renewable energy and nuclear alternatives. That said, China still consumes far less oil per person than the United States.

Still, to fuel an economic expansion that stood at 10.3 percent in the last quarter, it must continue to secure new supplies. That means potentially siphoning off oil that otherwise would have been bound for the West.

http://www.globalpost.com/dispatch/africa/101207/china%E2%80%99s-oil-juggernaut