The Daily Oil Bulletin
Easier access to oil elsewhere in the world may explain why China has so far failed to become a significant player in Canada's oilsands, says a China specialist.
China is a significant net importer of oil. Canada's oilsands are trumpeted as the world's second-largest oil supply. But although Chinese energy companies embarked on a multibillion-dollar global shopping spree, only two relatively small deals have involved the oilsands.
In a speech at a TD Securities oilsands conference in Calgary last week, a Chinese oil executive suggested major Canadian oilsands producers are indifferent to the Chinese market (DOB, July 7, 2006).
But part of the explanation may also be that Chinese oil companies don't have to come to Canada, suggests Dr. Wenran Jiang, acting director of the China Institute at the University of Alberta.
Instead of doing deals in the oilsands -- where land prices have skyrocketed in the past couple of years -- Chinese companies are striking deals to secure easier supplies of conventional crude elsewhere in the world, said Jiang, who is also an associate professor of political science at U of A.
"They're around the world (with) many deals going on. They don't have to come to Canada," Jiang said in an interview after his conference presentation
And while the Alberta government has an "open arms" policy that encourages Chinese investment, Jiang said Ottawa's position isn't as clear. And trade barriers remain.
"When you have business executives sometimes taking four, six, eight months to get a (Canadian) working visa, it's not (a) great incentive," he said.
Another disincentive, he said, has been the exaggerated, negative speculation in the press about China's pending takeover of Canadian companies. China National Petroleum Corporation (CNPC) sought to allay such fears last week with assurances that it would prefer joint ventures over acquisitions.
"When they go around the world in terms of getting access to conventional oil -- much easier, much cheaper -- then why come to Canada with all the high prices, with all the speculations of Chinese takeover of Canadian assets" Jiang asked.
And part of the reason China failed to pounce on oilsands opportunities may be the country's thirst for oil is exaggerated.
While media reports usually identify China as the world's second-largest energy consumer (predominantly coal), Jiang said they seldom mention the country is also the world's second-largest energy producer.
He said China is the world's third-largest oil importer, producing 60% of the oil it uses.
And while China's oil consumption has experienced spectacular growth, Jiang said it is still far too small to be the main driver behind high global prices -- though it's often unfairly blamed.
China consumes only about 6.5 million bbls a day of total global oil consumption of more than 80 million bbls a day. The United States consumes more than 20 million bbls a day.
"So the Chinese look at the picture and say, 'Why do they keep blaming us'"
While economic growth in China and India increased oil demand in recent years, it is only one of many factors contributing to high oil prices, Jiang said.
Other factors include political or military issues in Iraq, Iran, Latin America and Africa. "These are all issues that affect energy prices. And yet whenever energy price go up, China is singled out as the factor," he said. "(But) if you look at the numbers, it doesn't add up."
In the face of global supply constraints and soaring demand, China felt vulnerable, which is why the country is making deals around the world to secure production, Jiang said.
After all, he noted, Western countries have reserves around the world. "So I think it's a fair game (for China to do the same)."
Jiang believes the trade goal should be to find mutually beneficial solutions to China's energy problems. "I advocate co-operation ... to bring them into the market rather than pushing them away to Iran or Kazakhstan," he said.
He believes it would be better for China to invest in Canada than trouble spots like Iran. And despite the lack of progress to date, he believes the potential exists for CNPC to secure its minimum target of 200,000 bbls a day of Canadian oilsands production.
Commenting on Enbridge Inc.'s proposed Gateway pipeline that would ship Alberta crude to the West Coast for export to markets such as California, China, Japan and South Korea, Jiang said such market diversification could only be good news for Canadian producers.