China′s hunger for energy is insatiable | Asia| An in-depth look at news from across the continent | DW | 27.07.2012
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China's hunger for energy is insatiable

China's energy needs have doubled since 2000. However, the country does not have enough resources of its own and has been shopping around the world.

This week, China's state-controlled China National Offshore Oil Corporation (CNOOC) launched the country's richest foreign takeover bid ever by agreeing to buy the Canadian oil producer Nexen for 15.1 billion US dollars.

If it goes through, the deal would represent a highpoint on China's shopping tour for energy. China will gain access to large oil and gas depots in western Canada, as well to exploration and production holdings in the North Sea, the Gulf of Mexico and offshore West Africa. The CNOOC's energy reserves would increase by a third, making it rise considerably from last place in the international energy firms rankings.

The aim of the bid is to secure China's future energy needs, Leon Leschus from the Hamburg-based Institute of International Economics (HWWI) told DW. He pointed out that China currently depended on imports to cover its oil needs. "The demand has doubled from 4.5 to nine million barrels per day since 2000. And it is going to grow."

China comes second after the US, which consumes some 19 million barrels per day. According to BP estimates, China's needs will double again by 2030.

Global race for resources

A second reason for China's interest in taking over Nexen is that it will also acquire new exploitation techniques and technology. "The Canadian company is very active in the area of oil sands as well as in deep sea drilling. China needs this know-how so it can tap into tis own resources," said Leschus.

Kevin Reinhart is the head of Nexen

Kevin Reinhart is the head of Nexen

He added that the company also knew how to exploit shale gas even if it is not a market leader.

Oil shales and sands are unconventional sources of oil because they are difficult to access and moreover their exploitation can be damaging to the environment.

In 2005, CNOOC bought 16.7 percent of the Canadian oil sands specialist MEG Energy and five years later it invested some two billion US dollars in the oil sands company Opti Canada alongside Nexen.

"The race has already begun," said Claudia Kemfert, an energy expert at the German Institute for Economic Research. "Many countries in the world have enormous energy needs and a great hunger that needs to be satiated."

Leon Leschus added that the US and Europe fear that China will increase its influence on the global energy market by buying up foreign firms. He did not see any negative consequences for Germany yet. "There is still enough oil and Germany gets its oil from many countries." He said even if one supplier disappeared there would be others.

Awaiting approval

Although observers predict China's bid will be successful, it still needs approval from the shareholders of both countries, as well as by the Canadian antitrust agency and the Canadian, UK and US governments.

An oil platform in the Norwegian sector of the North Sea

There is a global competition going on for natural resources

There have already been encouraging signs from Ottawa and Canadian Trade Minister Ed Fast has said Canada welcomes foreign investment that will contribute to the country's economic growth and secure its long-term well-being.

In 2005, the US had blocked a similar takeover bid for fear of losing jobs. CNOOC has prepared this time by promising to keep all employees and make Canada home base for its Western Hemisphere operations.

On Friday, a source close to CNOOC told Reuters the company had asked the US government to review the bid.

Author: Christina Ruth / act (Reuters, AP)
Editor: Shamil Shams

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