While Western economies are mired in the worst financial crisis since the Great Depression, China is making plans to handle the energy demands an expanding economy while depressed share prices around the world will allow them to do so more cheaply. The world’s second-biggest energy user will offer discounted lending rates for overseas oil investments and possibly use country’s $1.95 trillion in foreign-exchange reserves to help companies buy fields abroad. China’s foreign-exchange reserves are the world’s biggest.
China National Petroleum, the country’s biggest oil producer, said the nation may set up an oil fund to boost exploration in a statement on its Web site, citing the state’s three-year energy plan. China National, the parent of Hong Kong-listed PetroChina, acknowledged that oil companies are being encouraged to boost development and acquisitions of resources abroad. The plan to 2011 covers China’s ambitions to speed up the development of alternative fuels, coal-to-liquids projects, and the setting up of a separate fund for the stockpiling of crude oil.
Chinese companies have resumed their quest for global resources as the economic slowdown and falling commodity prices prompt a sell-off in equity markets, making companies cheaper to acquire. Crude oil in New York has fallen more than 70 percent from a record $147.27 a barrel reached in July last year.
The fund “makes perfect sense because overseas acquisition will instantly boost production and reserves, probably at very attractive long-term prices amidst distressed asset valuations at the bottom of the oil price cycle,” Gordon Kwan, head of China energy research at CLSA Ltd., wrote in an e-mail today.
The statement from China National went on to say that the country wants to find additional crude oil reserves of 700 million metric tons along with natural gas deposits of 1.2 trillion cubic meters within the three years to 2011.
China is planning to have total oil refining capacity of 440 million tons by 2011 and will partner on joint-venture refinery projects with companies from Venezuela, Qatar and Russia. China’s oil-processing capacity is about 396 million tons currently, according to Bloomberg calculations.
The government plans to start building four additional liquefied natural gas import terminals in Qingdao, Ningbao, Tangshan and Zhuhai, China National said. China will start building pipelines to import oil and gas from Myanmar before the end of 2011.
China national also said the building of coal-to-liquids projects in the northern provinces of Shanxi, Inner Mongolia and Ningxia will be accelerated and that the government will also set up separate funds for crude oil stockpiling, energy exploration and coal-bed methane production.
China has sought to take advantage of the rout in commodity prices to lock in resources worldwide. Chinese oil concerns have shown interests in the assets of U.S.-based Kosmos Energy worth at least $3 billion. China Minmetals, the country’s biggest trader of metals, agreed to buy Australia’s debt-laden OZ Minerals for A$2.6 billion ($1.7 billion) in cash, gaining copper, zinc and gold projects in Asia. The purchase follows Chinalco’s $19.5 billion agreement to invest in Rio Tinto Group last week.