LATIN AMERICA/CHINA: Oil interests come to the fore

Por Venezuela Real - 6 de Octubre, 2006, 15:07, Categoría: Petróleo/Energía

Oxford Analytica
29 September, 2006

SUBJECT: China's place in the Latin American oil industry.

SIGNIFICANCE: Latin America is a major source of commodities for China, of which oil and gas are potentially among the most important. Given the traditional dominance of US companies and markets, questions arise as to whether China poses a serious threat to US hydrocarbon hegemony in the region.

ANALYSIS: China is the world's second largest consumer of oil, currently importing around 3.2 million barrels a day (b/d), comparatively little of it from Latin America. One forecast has suggested a rise to some 8 million b/d by 2020. China has become a major consumer of, and increasingly an investor in, Latin American commodities, and is clearly interested in the region as a source of oil and gas (see LATIN AMERICA/CHINA: Trade shows mixed outcomes - May 1, 2006). However, almost without exception, the major oil and gas deposits are found on the eastern side of the Andes, a significant challenge.

Unsurprisingly, the combination of this geology and geography, and the relative proximity of the US market, means that most regional hydrocarbons infrastructure looks east to the Atlantic (or north to the Caribbean). As such, even where it is able to secure preferential access to production, with a few exceptions, China faces the costly choice of either having to haul the hydrocarbons further or construct new westward-facing infrastructure to allow trans-Pacific shipment.

Simply by virtue of its demand for hydrocarbons, China is playing a role useful for countries such as Venezuela and Bolivia, providing a timely alternative to the 'western' international oil and gas companies. As such countries review the state's role in hydrocarbon development, and in some cases amend their laws and seek changes in contractual relationships, bilateral relationships with China may be viewed in a new context (see BOLIVIA: Hydrocarbons reform faces obstacles - August 22, 2006; and see VENEZUELA: Doubts over oil policy raise risk premium - June 15, 2006).

Oil policy. The prevailing model of hydrocarbon development in most countries has essentially been built around the international oil companies developing the oil, sometimes in conjunction with the local national oil company, and putting it into the international market. However, if other national considerations come into play (eg the desire to develop or access new markets), hydrocarbon development by companies representing and operating in a new market such as China may be perceived as offering greater value. In addition, if the host country sees hydrocarbon development as a vehicle for national economic and social development rather than simply as a source of government funds, an offer within a bilateral framework to fund and build a range of needed infrastructure could be attractive.

The other element that contributes to national policy formulation in this area is a country's attitude towards the United States. While China may have taken advantage of this, it seems most likely that it is entering the region to develop markets for its products, and to invest in and access commodities and natural resources across the region, without overt political expectations or demands. However, this Chinese economic expansion may have political/geopolitical consequences, in the longer term if not immediately, and much Chinese financial support is in the form of loans rather than foreign direct investment, with future consequences in terms of debt:

   1. Venezuela. Caracas's current political priorities would appear to complement China's energy strategy. During President Hugo Chavez's visit to China in late August, a range of deals were announced, principally linked to energy (see VENEZUELA: Politics and prices key to oil investments - August 31, 2006). These agreements come on the back of a relatively well-established Chinese presence in the Venezuelan oil industry. Chinese oil companies have been operating the Intercampo Norte and Caracola blocks since 1997; more recently, CNPC began work on 15 declining oil fields in Zumano in eastern Venezuela. Subject to contractual and fiscal terms, extra heavy oil upgrading investment looks economically attractive and offers materiality. Chavez has also declared that he would like to double Venezuela's oil sales to China from 150,000 b/d to 300,000 by year-end, rising to 1 million b/d within six years.

      From China's perspective these factors appear likely to offset Venezuela's relatively disadvantaged geographic location and the cost of upgrading Chinese refining capacity to handle heavy sour Venezuelan crude. It is therefore no surprise, given Venezuela's huge hydrocarbon resources and its publicly declared intention of reducing its dependence on the US market, that it is China's primary energy development focus in the region.

   2. Colombia. In August, India's ONGC (Oil and Natural Gas Corporation) and China's Sinopec acquired a 50% stake in Omimex de Colombia, a Delaware-based company that operates oilfields in Colombia. They may view this simply as another opportunity to expand a diversified portfolio of oil and gas assets, or they may see Colombia as part of an integrated sub-regional energy strategy alongside Venezuela, with Colombia providing potential access to the Pacific and thus China (via pipelines and port facilities yet to be agreed or built) for Venezuelan oil and gas.

   3. Brazil. CNOOC (China National Overseas Oil Corporation) is reported to be examining options with Petrobras in refining, pipelines and exploration, and Sinopec as reaching agreement for a 1 billion-dollar gas pipeline to cross Brazil. However, while China may be welcomed into some areas, Petrobras has so far succeeded in retaining Brazil's material upstream 'jewels' for itself. Petrobras is expanding its overseas upstream operations and is thus a competitor for China internationally. It is also reported to be interested in buying a stake in the Okinawan refinery Nansei Sekiyu as a platform for sales into China, based on upgrading the refinery to run Brazilian heavy crude.

   4.Bolivia. Shengli International Petroleum Development has opened an office in the eastern region and is reported to be willing to invest up to 1.5 billion dollars, some of it in or with state oil company YPFB, although they are awaiting new hydrocarbon laws before entering into any deals. Exporting Bolivian gas to China would necessitate construction of a cross-country, trans-Andean gas pipeline and new liquefaction and port facilities on the Pacific coast. This has thus far frozen the project, with the economic requirement of a Chilean export plant foundering on historical Bolivian claims to the relevant part of the Chilean coast (see CHILE/BOLIVIA: Maritime dispute comes to the fore - March 24, 2006).

Although China could table a highly attractive infrastructure development offer, Bolivia may succeed in making progress in its sovereignty dispute with Chile and successfully renegotiate its agreements with the existing oil and gas contract holders. Moreover, the Pacific offers competitive markets (including Chile and the United States) much closer than China to any export port.

   5. Peru. CNPC (China National Petroleum Corporation) has a 45% stake in Pluspetrol Norte, Peru's largest operator, with proven reserves of some 250 million barrels. This is in addition to fields already operated by CPNC Sapet.

   6. Ecuador. A Chinese consortium (including CNPC and Sinopec) has purchased 1.4 billion dollars in oil assets from Canadian EnCana, which includes around 75,000 b/d from five production blocks, and a stake in the OCP heavy crude pipeline.

   7. Argentina. Five billion dollars has been committed to the oil industry; a Chinese joint venture with Angolan state oil company Sonangol may explore offshore with new Argentine state company Enarsa.

CONCLUSION: China faces numerous risks in the Latin American hydrocarbon sector, including changes in the political climate that could reduce its attractiveness as an upstream partner, and the risk that a lower oil price could force host governments to focus on economic factors rather than political preferences. With the possible exception of extra heavy oil upgrading in Venezuela, China's portfolio could consist of small, high-cost assets whose competitiveness will be questionable in a lower oil price scenario.

de la dirección del
Nuevo Portal Principal

Más información ...


<<   Octubre 2006  >>
2 3 4 5 6 7 8
9 10 11 12 13 14 15
16 17 18 19 20 21 22
23 24 25 26 27 28 29
30 31      



Escribe tu email:

Delivered by FeedBurner


Alojado en