China owns greatest foreign oil assets in Africa

May 13, 2015 12:00 AM

The late start of the overseas expansion of Chinese oil companies means that their foreign oil assets are largely located in Africa rather than in main oil producing countries in the Middle East, according to the China Economic Weekly.

Chinese oil companies embarked on overseas expansion to secure supplies after China became a net importer of crude oil in 1996, said the report.

Chinese companies were forced to look to less developed countries and regions, mostly in Africa, because foreign oil giants had already taken up most of the locations that had rich reserves and were easy to exploit, according to the report.

They also have faced regulatory restrictions in countries such as Saudi Arabia and Kuwait, both OPEC members, where it is difficult for foreign firms to obtain rights to explore and excavate oil.

Chinese companies, however, do own stakes in oil assets in other OPEC member countries, including Nigeria, Angola and Venezuela, said the magazine.

In Iraq, Chinese companies have acquired rights to 21% of the oilfields auctioned after Saddam Hussein was ousted by the US-led coalition in 2003.

Chinese oil companies have also secured supplies through arrangements, such as loans offered by Beijing. China formerly lent US$4 billion to Angola, which is being repaid by oil produced by the African country.

While 90% of the overseas oil output of Chinese companies is not shipped back to China, the foreign assets help protect the country's energy security, according to Lin Boqiang, head of Xiamen University's China Center for Energy Economics Research.

When global oil prices surge, Chinese companies can sell their overseas oil output and then buy cheaper oil in other markets, Lin said.

According to Liu Qian, an assistant research fellow at China University of Petroleum, the only crude oil Chinese companies ship back home from overseas is that pumped in Kazakhstan, which is possible because of the short distance and the pipelines between the two countries, Liu said.

There are also countries that require a certain percentage of oil output to be sold locally, and the cost of transportation and the lack of storage space in China are also factors preventing Chinese oil companies from shipping their overseas output home, Liu added.

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