Singapore (Platts)--17Feb2011/611 am EST/1111 GMT
Chinese national oil companies have a high degree of independence from the government, and their recent overseas investments have been driven largely by commercial interests rather than government instructions, the International Energy Agency said Thursday in a report. In addition, the investments by the Chinese oil companies have largely boosted supplies of oil and gas, which other importers rely on, the IEA said in a report 'Overseas Investments by Chinese National Oil Companies'. "These are far from puppet companies operating under control of the Chinese government, as many have assumed," said Julie Jiang, one of the report's co-authors. "Their investments in recent years have been driven by a strong commercial interest, not the whim of the state." Chinese companies spent $18.2 billion on merger and acquisition deals in 2009, which accounted for 13% of total global oil and gas acquisitions of $144 billion, and for 61% of all acquisitions by national oil companies, the report said. Last year, Chinese companies spent approximately $29.39 billion with more than half invested in Latin American. According to IEA data, successful acquisitions allowed China's NOCs to expand their overseas equity shares from 1.1 million b/d in 2009 to 1.36 million b/d in the first quarter of 2010. By comparison, China's domestic production in 2009 was 4.0 million b/d. Chinese oil companies now operate in 31 countries and have equity production in 20 of these, although their equity shares are mostly in four countries: Kazakhstan, Sudan, Venezuela and Angola, the IEA said. According to the IEA, another common misconception is that the government imposed a quota on the amount of equity oil that must be send back to China. The research found no evidence of this. "Decisions about the marketing of equity oil, where the Chinese companies have control over the disposition of its share of production, appear to be dominated by market considerations. For instance, almost all the equity production Chinese NOCs have in the Americas was sold locally instead of being shipped back to China," the report said. It said Chinese NOCs had been exploring investments in transnational pipelines to increase supply, as well as to diversify import routes to reduce its reliance on the Strait of Malacca -- a very busy channel linking the Indian and Pacific oceans. "Investments by NOCs in transnational pipelines could provide alternatives to diminish the reliance on the Strait of Malacca and diversify its imports from other sources, such as Russia and Central Asia, to bring oil and gas imports from new routes," the report said. Even though a rising share of China's oil imports is set to arrive via other routes, the volume of imports shipped through the Strait is set to keep rising, the report said. According to the IEA, 77% of China's current crude oil imports pass through the Strait of Malacca. By 2015, it is estimated that crude oil passing through the Strait to China will rise to 3.5 million b/d from 3.1 million b/d in 2009.--Calvin Lee, calvin_lee@platts.comSimilar stories appear in Oilgram News. See more information at http://bit.ly/OilgramNews