What Drives China to Invest in Oil Beyond its Borders

China’s attempts at investing in oil assets in recent years meant paying a hefty sum of $35 billion to foreign oil firms. However, this also suggests that the country will soon be able to raise oil output and eventually match that of many individual Middle East countries, including Kuwait.

Based on International Energy Agency (IEA) statistics, China’s new foreign acquisitions will help it push annual overseas crude oil output by two-fold, or up to 3 million bpd.  This volume is comparable to Kuwait’s yearly crude oil turn out.

According to IEA economist Fatih Birol, China will soon become a key producer of oil from foreign sources largely due to mergers and acquisitions entered into by China’s state-run oil firms.  Birol made these pronouncements during the recent London convention among global oil producers.

Since 2009, China’s oil giants have been actively purchasing oil assets from the United States and African countries like Angola. That year, it reportedly doled out more than $90 billion. Last year, another $35 billion worth of oil assets were acquired via JV partnerships and direct buyouts.

A group of experts opined that China is accumulating oil assets from other countries so that it could use this supply to feed its domestic market.  The IEA, however, suggests otherwise, citing that the country markets its overseas oil output to the global community. China’s local oil production curve is pointing downwards, so naturally it is exerting effort to look for reliable oil assets beyond its own boundaries.

The IEA’s statement was bolstered by China’s assertion that it is not bringing in its overseas oil just to feed local demand. Chinese authorities say local demand is too high, and oil produced from its oil assets overseas is actually no match for China’s appetite for oil.

The organization also mentioned that countries investing in foreign oil assets usually do so with the expansion trade and business largely in mind.

The rise in acquisition of foreign oil assets, as well as the growing interest in cutting-edge deepwater oil exploration technologies by countries like China, has caused shifts in the world’s crude oil industry – changes that may also challenge conventional ways on how to invest in oil and gas exploration.

Without a doubt, China’s presence as a player in the global oil field has become much stronger and, as such, its involvement in global politics, including easing tensions among warring nations, has also become inevitable.