China is one of the fastest growing economies in the world. Its multi dimensional impact is felt by the rest of the world, particularly in the global oil and gas industry. A focus on rapid and stable industrialization has led the Chinese economy to increase its oil demand rapidly, such that it has earned itself the 2nd position amongst oil consumers of the world, trailing behind only the U.S. While China by itself is a relatively oil-rich nation, its own oil well investments are unable to meet its demand. It transformed from being a net exporter of oil to a net importer in 1993. Their own production meets only half its domestic demand.
Despite the fact that China is the fourth largest producer of oil in the world, its own oil well investments are projected to be fruitful for about 2 decades, after which their resources will be exhausted. Therefore, China has been increasing imports such that 32% of its oil needs are fulfilled by foreign oil. A report from the International Energy Agency estimates that China’s imports will equal those of the U.S. by 2030.
In terms of oil sources, China has come to depend heavily on the Middle Eastern counties for oil; 58% of their oil imports are from this oil rich region of the world. In fact, Chinese support to rogue regimes like Iran and Sudan can be associated with their never-ending quest for oil partners. Many of those making oil well investments in the Middle East rely on the steady demand from China for protection from the turbulence of the oil industry.
Recently, China has increased its interest in exploration and production operations in countries like Kazakhstan, Russia, parts of West Africa, Saudi Arabia and Canada. Its growing relations with these parts of the world have been a major cause of concern for the U.S. For instance, Chinese state-owned oil companies have been making an attempt to further pursue oil well investments in Canada, the foremost oil supplier to the U.S. This may imply a decrease of up to a third of Canada’s future oil exports to the U.S. Similarly, Venezuela, which is the 4th largest oil supplier to America, recently announced a series of oil deals with China, again threatening to dislodge America's predominant position of oil imports. It has even been predicted that control over world oil resources may be a major arena of future conflict between the U.S. and China.
Another concern associated with the Chinese increase in oil well investments is that it will hasten the impending oil peak, an event which will be immensely detrimental for all countries across the globe. One can only wait and watch to know what will happen, but the concerns are growing.
