A Chinese oil company this month bought a small but significant player in the Canadian oil sands, the third-largest deposit of accessible oil in the world and the source of more than a quarter of U.S. oil imports. The sale of Nexen Inc. to the Chinese National Offshore Oil Company for $15.1 billion was the largest Chinese overseas acquisition ever and continues a patient, strategic Chinese campaign to secure energy assets in North America.
Also this month, the U.S. State Department issued its latest environmental report card on the long-delayed Keystone XL pipeline, which would bring more of that oil-sands crude from Canada to Nebraska and on to the U.S. Gulf Coast.
Americans have a love-hate relationship with Canadian oil, as thousands of anti-Keystone demonstrators in Washington recently reaffirmed. The Chinese are clearly not so conflicted.
What these events made obvious is that if people think Canadian oil will stay in the ground if we just don’t build Keystone XL, they are wrong.
National oil companies like CNOOC, which is 70 percent owned by the People’s Republic of China, already control more than 80 percent of the world’s oil reserves. Of the 20 percent that remain open to market-based development, 60 percent are in Canada, almost all in the oil sands region of Alberta.
That fact has not escaped the attention of China, whose rapid growth has been fueled by quantum leaps in oil consumption.
Until 1993, China was self-sufficient in oil. Today it has to import almost 60 percent of the oil it consumes, and it is the world’s second-largest oil user after the United States. By 2035, the U.S. Energy Information Administration expects China to import 75 percent of its oil needs.
This voracious thirst for petroleum has driven the Chinese to sign long-term oil contracts with countries such as Venezuela, another traditional U.S. oil supplier, and aggressively explore opportunities in energy-rich and investment-friendly Canada.
As one Canadian energy executive who has worked closely with Chinese oil companies explained, China has piles of cash locked in U.S. treasury notes that it regards as declining assets. Investing this cash in energy resources abroad is a no-brainer, both for their intrinsic value and for the technological expertise Chinese companies can gain. (more…)