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China wants heavy oil — sort of
Gary Park For Petroleum News
China’s stable of state-run oil companies will give priority to building their access to heavy oil over the next decade, official sources said during a two-day conference in Beijing initiated by the Alberta government.
That’s good news for Enbridge, which is having trouble pinning down an anchor shipper for its proposed Gateway pipeline — the first direct link between the Alberta oil sands and China.
The inaugural World Heavy Oil Conference, from Nov. 12-15, was dominated by a flurry of indications that China is ready to move from the conventional oil realm to heavy and alternative oils to satisfy its demand.
China Daily, the official government newspaper, said that as prices for conventional oil products climb over the long run, China will have to look elsewhere, making heavy oil an unavoidable “part of our energy segment in the near future.”
Heavy oil production to grow Zhang Fengjiu, deputy chief engineer at offshore producer China National Offshore Oil Corp. told the conference that by 2010 CNOOC’s daily production of heavy oil will grow to 500,000 barrels per day from the current 200,000 bpd, accounting for 60 percent of its volumes.
China Daily also reported that integrated oil giant, PetroChina, is eager to tap into heavy oil resources, but is not yet ready to announce a strategy for heavy crude development.
Bob Lockwood, president of Cambridge Energy Research Associates, said PetroChina’s parent company China National Petroleum Corp., is also scouring the globe for heavy oil prospects.
He said his own firm has reached a memorandum of understanding with CNPC to explore ways of bringing heavy oil from Canada to China.
Prior to the conference, Wenran Jiang, acting director of the Edmonton-based China Institute, said China viewed the conference as one of many opportunities to engage the outside world to enhance its own energy security.
The China Institute was established last year through a C$37.5 million Alberta government endowment to promote Canadian trade relations with China.
New administration less eager for China ties But some of those hopes have taken a setback since the election in January of the Conservative government of Prime Minister Stephen Harper.
The new administration has been less eager than its Liberal predecessor to strengthen ties with China and has reportedly upset Beijing by criticizing China’s human rights record and trade practices, granting honorary Canadian citizenship to the Dalai Lama, Tibet’s exiled spiritual leader, and delaying talks over an agreement in principle to form a strategic Canada-China partnership.
The chilly nature of relations was underscored when China cancelled plans for a summit between Harper and Chinese President Hu Jianto prior to the opening of the annual Asia-Pacific Economic Cooperation conference in Hanoi Nov. 15.
However, federal Natural Resources Minister Gary Lunn joined Alberta Energy Minister Greg Melchin at the heavy oil conference.
Along with Enbridge Executive Vice President Richard Bird, the two ministers held meetings with Chinese government officials and China’s major oil companies in a bid to speed up negotiations on the Gateway project.
Foot-dragging by the Chinese could contribute to a delay in completion of the C$4 billion Gateway pipeline from 2010-2011 to 2012-2014, but establishing a timetable is not possible until a lead shipper emerges from the current negotiations.
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