Business

China: The Bigger Oil Story Behind the Headlines

globally and what can we expect over the next 5-10 years?

Michael Levi: What we do see is an interaction between China’s efforts to deal with its local environmental problems, its efforts to provide security of supply for its energy sources, and the climate outcomes that develop. To the extent that China feels more confident, for example, in securing natural gas from a variety of sources–domestic, LNG, Russia, Turkmenistan–it becomes more willing to use natural gas to replace coal as a way of cutting local air pollution. That, in turn, has benefits for global climate change.

I think that’s how you think about the impact of China’s resource quest on climate change. It’s the sort of second order effect. I would’ve said a few years ago that extreme Chinese concerns about the security of natural gas supplies means that there won’t be a substantial shift from coal in that direction, which itself has timing implications, but this changing level of confidence, together with much greater concerns about local air pollution, starts to tilt things in a different direction.

James Stafford: How is China’s resource hunger changing the face of competition globally for oil and gas plays in frontier venues in Africa and the Middle East?

Michael Levi: Still, I think you need to distinguish between two different kinds of frontier venues. Chinese companies appear to have considerably more appetite for politically risky places. You’ve seen that in Sudan, for example. That’s a place where they have a peculiar kind of competitive advantage over Western firms.

Where I think the competitive advantage has been overstated, at least by casual observers, is in frontier places that are frontier because of their technical difficulties. The Chinese companies still are not on the cutting edge. They still need to partner, at a minimum, with Western companies, and that constrains their ability to directly out-compete Western multinationals, because in so many cases they need the Western multinationals.

You saw that, for example, in the more technically complicated parts of the Iranian natural gas sector. When Western companies pulled out because of sanctions, there was a fear that Chinese companies would fill in and undermine the impact of sanctions. It turned out that in a lot of cases, the Chinese companies weren’t capable of operating the projects, or needed equipment from Europe or the United States that they simply couldn’t get.

Source: http://oilprice.com/Interviews/What-The-Oil-Headlines-Miss-Interview-with-Michael-Levi.html

 

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