Late May’s news that the Chinese are snapping up nearly half of a strategically important refinery in Singapore, plus pouring a staggering $442billion into expanding renewables capacity, should send shivers through corridors of power here in the West.
Couple this with the May announcement of a 10-year agreement with Brazil for the import of eventually 200,000 barrels of crude a day, as well as a pledge by Venezuela to increase oil exports to China eight-fold within “a few years”, recent massive gas supplies deals struck with Russia and an upcoming refinery purchase deal in Japan and it is clear that the Beijing Dragon is taking advantage of the current recession to strengthen its grip on global energy markets.
But I am hard pushed to find any similar level of activity in the West. Rather, the flavour among the IOCs seems to be, “Well we’ll keep key strategic investments rolling along but otherwise reduce costs, and that’s about the limit”.
Needless to say, jobs are being quietly culled and the supply chain brutalised – all carefully calculated to keep analysts happy from quarterly results to quarterly results to protect share prices rather than playing a truly long-term game.
Hundreds of UK delegates had the opportunity of experiencing the Chinese at the Offshore Technology Conference in Houston a few weeks ago. Theirs was a huge and carefully choreographed presence – watching, listening, inscrutable. But I wonder how many Brits actually ventured around the Chinese pavilion area.
Indeed, the Chinese were distributed throughout the Houston show, one way and another, quietly ensuring that their very considerable influence in places such as Singapore, where PetroChina, China’s largest oil&gas producer, is acquiring, at a significant premium, 45.51% of an elderly, 285,000 barrels per day refinery via a two-stage offer reportedly valued at more than $2billion for Singapore Petroleum Company (SPC) – half now and half later. A statement by PetroChina to the Hong Kong Stock Exchange added that it would make an offer for the rest of SPC upon completion of the first deal.
This is an important piece of the petroleum jigsaw puzzle for the Chinese; moreover, one that is located offshore rather than on mainland China. It means the Chinese can easily sell finished petroleum products on to global markets if they are so minded.
Leaving aside competition with peers like Sinopec, it should not be forgotten that Singapore has an oil product exchange, and that means pricing power.
Not only that, Singapore Petroleum is itself involved in oil&gas exploration; also production from assets in China, Indonesia, Vietnam, Cambodia and Australia.
PetroChina, which in late-May overlook top dog Exxon on valuation, said: “SPC will become a new platform for the implementation of our international strategy and will provide a broader foundation and stable path for development.”
Switching to renewables, while the UK frankly struggles to get anywhere with its renewables targets, it looks as if the Chinese energy juggernaut has its foot firmly on the accelerator.
According to state media, Beijing intends a staggering $440billion stimulus package, and the emphasis will be on wind. It happens that China was on the agenda at the 2009 All-Energy show, at which I warned a “Big Push” conference session that Britain could rapidly sleep stumble into a position where it imports most of its turbine needs from the Far East, notably China.
The foot is in the door already as it is the Chinese who are manufacturing the foundations for the UK’s Greater Gabbart offshore windfarm.
Under the latest plan, China’s wind power capacity will reach more than 100 gigawatts by 2020, more than three times the target of 30GW set in 2007.
It was reported that Zhou Xi’an, a director-general at the State Energy Administration, said some days ago that China aimed to boost the share of renewable energy, excluding hydropower, to 6% of its overall energy use by 2020, from the current 1.5%.
The renewables stimulus package follows on from November’s announcement that Beijing intends to support car manufacture, petrochemicals and eight other sectors as part of a $584billion support plan.
China has also set a goal to cut energy consumption per unit of gross domestic product by 20% and pollution by 10% by 2010, from levels recorded for 2005. Don’t forget, Beijing sits on $1.9trillion dollars in foreign exchange reserves to fuel its economy, which is now the world’s third largest.
It has a lot more shopping planned, and each purchase will put pressure on the West. Whether we realise it or not, an energy resources war is quietly gathering momentum.
Meanwhile, Britain has become a pauper, sold down the river by arrogant gambler-bankers like disgraced “Fred the Shred” Goodwin who, disgustingly, hangs on to both a knighthood and massive pension package; and terrifyingly poor-quality government under Gordon Brown who, as those of us with reasonable memories remember, stupidly disposed of Britain’s gold reserve when he was Chancellor.
In 2007, the Times reported that Bank of England officials had apparently serious misgivings over Brown’s determination to sell 400 tons of bullion in a series of auctions between 1999 and 2002, when the price was at a 20-year low. Since then the price has rocketed, leaving the poor benighted British taxpayer billions of pounds out of pocket.
And still the stupid decisions continue; witness our editorial about current Chancellor Alistair Darling’s inadequate fiscal stimulus package for the North Sea offshore industry, which the Treasury has been milking mercilessly.