Sunday, April 10, 2005


Energy: security of supply

A worldview for energy? Should energy be market or non-market?

Global energy is becoming non-market. For example, China is increasingly involved in the energy industries of important suppliers to the United States - Venezuela and Canada. And, for now, China have decided not to acquire a large energy company in the US itself. China takes a non-market view, with its national oil companies.

"CHINESE state oil firm Cnooc's sudden departure from the bidding war over US oil firm Unocal in favour of ChevronTexaco's $18.4bn (£9.8bn, E14.4bn) offer suggests that, however high they raise the stakes, buying a US company is still, sometimes, a step too far."

"The three main Chinese state-owned oil companies, CNPC, Cnooc and Sinopec, have expanded operations from just 20 countries in mid-2003 to around 36 this year, striking deals in the Middle East, Africa, South America, and the Caspian."

"With 75% of global oil resources closed to the oil majors, they fear the Chinese might beat them to access. Sinopec early year last won a key contract to develop gas reserves on the edges of Saudi Arabia's Ghawar field on terms no Western firm would have accepted."

Therefore, at 75% non-market, oil and gas is highly political. As a consequence, countries that rely on the global market are surely unwise to assume that vital energy imports will be available to anyone who can afford them.
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