Arabs urged to boost oil investment in China

Arab hydrocarbon producers need to expand their oil and gas investment in China to take advantage of its mammoth market potential and ensure enough outlets for their rising energy exports, their official oil group has said.

Given the rapid growth in China’s hydrocarbon demand, which is turning it into the world’s second largest energy consumer after the United States, and a possible decline in the Arab nations’ hydrocarbon supplies to the West in the long term, regional countries need to forge a strong relationship with Beijing, the Organisation of Arab Petroleum Exporting Countries (Oapec) said.

“Despite the divergence in their interests and export and investment resources, the Arab countries need to look at China from the energy supply security perspective as well as the demand security perspective,” said the Kuwaiti-based Oapec, which groups 10 Arab hydrocarbon producers.

“This will encourage direct investment in China as the best strategic future move that will allow the Arab states to find viable marketing outlets for their oil, gas and petroleum products. Several Arab states have already invested in China while others are considering such investments in the hydrocarbon sector.”

In a 50-page study on the Arab-China oil relations until 2030, Oapec said the crude imports of the most populous nation on earth from the Arab region are projected to jump from only one million bpd in 2003 to nearly 6.2 million bpd in 2030 to account for about 56 per cent of Beijing’s total crude imports.

This will boost China’s share of the combined Arab oil exports from only around four per cent to 16 per cent in 2030, Oapec said.

A breakdown showed growth in the Arab oil exports to other countries will be much slower during that period, with those to North America rising by around 1.6 million bpd to 4.1 million bpd and those to Europe by about 2.8 million bpd to 5.2 million bpd.

Oil exports to other Asian nations will slip by nearly 100,000 bpd to six million bpd while total Arab oil exports will surge to 38.4 million bpd in 2030 from around 22.5 million bpd in 2003 and 21 million bpd in 2009.

The report showed Arab nations, which control nearly 668 billion barrels accounting for over 57 per cent of the world’s proven crude deposits, will be able to offset a decline in oil supplies from many other regions, including former Soviet Union, whose oil exports will decline to 5.6 million bpd from 7.2 million bpd.

At the same time, oil import needs in Asian and Pacific Regions will soar to 34 million bpd from 16.9 million bpd while those of North America will grow to about 13.1 million bpd from 11.2 million bpd and imports by Europe to nearly 12.8 million bpd from about 9.4 million bpd, according to Oapec.

It said Arab gas exports are also projected to sharply increase in the long term, rising from around 133 billion cubic metres in 2006 to 360 billion cubic metres in 2030. The increase will partly growing global demand, mainly in Europe, where it will soar to 520 billion barrels and in Asia and the Pacific, where it will swell to 225 billion cubic metres in 2030, Oapec said.

“The natural result of this heavy dependence by China on Arab oil will be a dramatic development of relations between the two sides. These relations have already started to take shape,” the study said.

“Such relations are illustrated in the rapid growth in China’s investment in the oil and gas sector in the Arab world, mainly in the Gulf, and the investments being channelled by Arab nations into refining and other sectors in China.”

The study urged Arabs and China to intensify what it described as an “objective and constructive dialogue” to expand cooperation in oil and gas, adding that crude demand in China is projected to soar from 7.1 million bpd to 16.5 million bpd in 2030, nearly 14 per cent of the global oil demand during that year.

“There is a great scope for expanding trade between Arab states and China in the field of refining products. This field is still limited compared to China’s massive market potential given the expected rapid demand for gasoline in that country because of a projected sharp rise in the number of cars,” the study said.

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