Challenge in China
The nation’s oil reserves are largely off limits to outside companies.
“Who would’ve guessed 20 years ago we’d be talking about U.S. energ y exports to China?” Alan Turley, a U.S. trade official
Even as China promotes reforms to its oil and gas industry, access to its shale and offshore fields remains largely off limits to foreign companies, a U.S. trade official said.
Interest has grown around China’s oil and gas reserves in recent years, as new drilling and hydraulic fracturing technology employed in the U.S. is believed to have the potential to revive China’s dormant oil and gas industry.
“They say, ‘We hear you, but we’re very far behind and will open up our market step by step,’ ” said Alan Turley, deputy assistant secretary of commerce for China and Mongolia at the U.S. International Trade Administration. “They say, ‘We’re still a poor developing country.’ ”
China announced this summer it was lifting restrictions on foreign investment in unconventional oil and gas development, with an eye toward developing shale and oil sands fields. But complicating matters, said Turley, who spoke at the Washingtonbased think tank Atlantic Council, is that leaders of state-owned oil and chemical companies tend to be politically powerful and are not eager to give up the ownership of fields that might one day yield massive production.
“What matters in China is your party rank,” he said. The state-owned company head “is usually higher ranking than the regulator overseeing them.”
China, now the world’s largest oil importer, has become an increasingly significant player in the world’s energy markets as its economy has grown exponentially over the past decades. It has a longestablished oil industry, but at present it is only able to supply roughly a third of the country’s demand, with the bulk of the supply coming from the Middle East, Africa, Iran and Russia.
At the same time, China has invested heavily in alternative energy, including solar, wind and battery technologies. China has become one of the world’s biggest producers of solar panels and solar energy.
China also has bought up increasing amounts of liquefied natural gas from abroad as it seeks to reduce its reliance on coal-fired power plants, which have been the source of dangerous air pollution surrounding many Chinese cities.
Some of that LNG has come from Cheniere Energy’s Sabine Pass facility near Port Arthur. But with the United States, Australia and the Middle East all quickly developing LNG export facilities, there are limits to how much American companies should expect China to take, said Robert Fee, chief of staff of external affairs at Houstonbased Cheniere.
“There’s still a lot of supply coming online,” he said. “China’s not going to suck it all up.”
At present, about 80 percent of Chinese oil imports move through the narrow Malacca Strait, which separates Indonesia from mainland Asia. The Chinese government has expressed interest in finding new energy supply routes, like those coming from Texas that would move through the Panama Canal to the Pacific and avoid the Malacca Strait.
“They say they’re very interested in U.S. gas, but it remains to be seen whether that’s rhetorical,” Turley said. “Who would’ve guessed 20 years ago we’d be talking about U.S. energy exports to China?”