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BP could be set to boost stake in China’s growing market China’s booming energy consumption changes global market dynamics Allen Baker Petroleum News Contributing Writer
China could be a major focus for BP in the years ahead as the huge country’s energy consumption grows and the British company builds on its already-healthy stake in Asia’s powerhouse.
Byron Grote, BP’s managing director and chief financial officer, was in China’s capital city early in July for further talks with Chinese officials, and with executives of the three biggest Chinese oil companies.
Grote was following up on a visit to BP headquarters in London in May by Chinese Premier Wen Jiabao, who was on a 12-day tour of Europe.
Wen stopped at BP and at GlaxoSmithKline, another big investor in China, at the start of a three-day visit in Britain, underscoring China’s interest in boosting trade ties.
BP has already invested more than $4 billion in China since 1973, including upstream investments in the Yacheng-13 gas field and the Liu Hua oil field in the South China Sea. BP is also an investor in China’s first LNG regasification terminal in southern Guangdong Province, and has very substantial interests in the petrochemicals business and a growing presence in the retail sector. $3 billion more In January, the company said it planned to add $3 billion to its China holdings over the next five years. Just where the investment might be targeted wasn’t mentioned.
But in May, BP announced that it had signed an initial agreement to build a new acetic acid plant in Nanjing to produce half a million tons annually, in a joint venture with China’s Sinopec. The company also announced at that time that it had signed a letter of intent to explore expanding its PTA plant in the Pearl River Delta to 1.2 million tons annually from 350,000 tons.
Two joint venture contracts for retail Chinese operations were also signed, for 500 stations in Zhejiang Province and 500 more in Guangdong, to be built by 2007. BP holds 40 percent of the Zhejiang deal and 49 percent of the Guangdong venture.
All told, the BP announcements in May totaled about $1 billion, the company said.
One thing is clear: The thirst for energy of China’s 1.3 billion people will grow in coming years, as BP’s own analysis shows.
China’s total energy demand surged 13.8 percent last year, according to the BP Statistical Review of World Energy released in June. China’s consumption of oil, gas, coal and nuclear power all increased by more than 10 percent. 41% of demand growth With an increase in consumption of 606,000 barrels daily, China accounted for a startling 41 percent of the growth in total world oil demand. Oil imports grew by 32 percent to 2.6 million barrels daily, tightening the world market and providing a big part of the reason for today’s high oil prices.
China is now the world’s second-largest oil consumer, with 2003 consumption (including Hong Kong) of 6,253,000 barrels daily.
And China’s consumption will almost certainly continue to grow.
China is building high-speed roads connecting major population centers in the interior regions in a bid to even out economic development, which has been concentrated along the eastern coast as industries serving the export economy have blossomed. Jammed freeways And motor vehicle ownership is surging. Six-lane expressways in Beijing are crammed with cars virtually around the clock. In outlying areas, there are increasing numbers of small scooters and motorcycles, which can cost the equivalent of about $600, thus bringing them into the range of a larger group of working people in China as incomes advance.
China will be able to supply some of its own oil, with large areas of the country and its coastline that have yet to be explored. But oil prospecting is difficult because of the country’s complicated geological structure. So the Chinese government has been looking at ways to add strategic storage, just as the United States has done. As with the United States, net importing of oil is likely for the foreseeable future. China’s challenge The challenge for China, BP’s Grote told the Xinhua news agency, is for China to gain access to global energy supplies at competitive prices and to create and apply appropriate technologies for transforming energy consumption.
Also in Beijing with Grote was Michael Smith, group head of Global Energy Analysis for BP.
Smith told Xinhua that a big change in the structure of economy would take place when energy starts to bottleneck the growth of economy, which would trigger the move from energy intensive industries toward services, light industries and high-tech industries.
The increase of energy efficiency as well as the shift from heavy industry helped Western economies deal with energy shortages, said Smith, who suggested that China’s current growth rate in energy consumption doesn’t look sustainable.
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