China s Oil Outlook Crude Imports and Energy Security

China’s Oil Outlook, Crude Imports and Energy Security By Robert Smith FACTS Global Energy Presented to IPAA 2006 Midyear Meeting June 14, 2006 Naples 1

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Oil Markets 4

Upstream Oil Developments 5

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Energy Security for China v China has not yet established a full-ranged energy security policy framework. However, the following has emerged as the main elements of the policy: Ø to enhance domestic oil and gas E&P activities and maximize oil and gas production Ø to diversify the sources of oil and gas imports, increasing the share of oil and gas imports from Russia and Central Asia 10

State Petroleum Reserves (SPRs) v NDRC is in charge of the work. The NDRC Bureau of Energy is the home to the National Office of SPRs v Target for Phase I (by 2008): Approximately 16 million m 3 or 100 million bbl (approximately 25 days of net imports). Phase I construction has been underway since 2004 v Target for Phase II (2010): Another 20 million m 3 or 126 million bbl, totaling 226 million bbl (approximately 45 days of net imports) v In principle, the funds will come mainly from the state, but also the state oil companies, which will manage and maintain the facilities. 11

• China’s Overseas Push: – State-owned companies have established overseas upstream departments • • CNPC/Petro. China Sinopec CNOOC Sinochem Zhen. Hua Petroleum CAOHC (China Aviation Oil Holding Co. ) CITIC 12

v Example of China’s Overseas Activities: Ø CNPC/Petro. China: Have investment and interest in Kazakhstan, Peru, Sudan, Venezuela, Indonesia, Algeria, Myanmar, Canada, Turkmenistan, Azerbaijan, Mongolia, Thailand, Papua New Guinea, Angola, Libya, Yemen, Iraq, Russia, Iran, Oman, Syria, Mauritania, Nigeria, Brazil, Ecuador, and others. Ø Total oil production that CNPC is involved reached 716 kb/d in 2005, up from 271 kb/d in 2000. CNPC’s overseas equity oil production was 400 kb/d in 2005, up from 137 kb/d in 2000. 13

v Example of China’s Overseas Activities (cont’d): Ø CNOOC: Indonesia, Australia, Algeria, Morocco, Myanmar, Canada, Nigeria, etc. CNOOC’s equity oil production was 30 kb/d in 2004, and is estimated to be higher in 2005. Ø Sinopec: Iran, Azerbaijan, Saudi Arabia, Canada, Brazil, Kuwait, Yemen, Kazakhstan, Oman, Nigeria, Canada, etc. Its overseas equity oil production was around 10 kb/d in 2005. Ø Sinochem: Thailand, Norway, Saudi Arabia, etc. Ø Zhen. Hua Petroleum: Kazakhstan Ø CAOHC (China Aviation Oil Holding Company): Spain, Dubai, Singapore, and Hong Kong Ø CITIC: interests in the Middle East and Africa 14

Thank You 15