Even though foreign participation will be critical to China's meeting its monumental energy challenges, the usual project-oriented approach of global energy companies may not be the best approach.
Rather, energy companies should consider to engaging with China in a more comprehensive, big-picture way -- lending capabilities, resources and knowledge on a scale that helps China solve its biggest issue: energy self-sufficiency.
To continue to grow, China may not only increase imports of crude oil, refined products, petrochemicals, coal and natural gas, and, at the same time, improve production capacity, but it must also improve energy affordability and efficiency and protect the environment.
Accordingly, the government will be less and less likely to approve project participation by foreign energy companies that doesn't advance solutions to these big challenges. But, the government may arrange for superior terms for companies whose participation is comprehensive, reflects their ability to invest in extensive capital projects, helps improve domestic exploration and production, and contributes to the development of unconventional energy resources, such as tar sands and other frontier resources.
To sustain economic growth and handle income disparity challenges, the government controls domestic prices of energy (and other staples), a situation that makes the energy business extremely difficult, especially when world market prices are high.
Tight regulatory controls on foreign energy investments contribute to a lack of foreign direct investment in energy that could threaten economic growth.
The country has been forced to import increasing quantities of oil and natural gas -- the prices aren't always advantageous, and the supply isn't always reliable.
Attempts by China's national oil companies to acquire international reserves and enter joint ventures have been met with mixed success.
China may be willing to grant special economic terms that create win-win situations for investments from foreign companies that truly help the country maintain a reliable supply of domestic crude oil and refined products.
Subsequent joint ventures and investments that are beneficial for both China and the global energy companies will be those that help China develop its substantial unconventional reserves (which are 16 times greater than its traditional reserves) and thus reduce crude and product imports and bolster supply.
Related Reports
China Electric Power Industry Report (Risk Study), 2006
China Electric Power Development Report, 2005
China Gas Development Report, 2005
China Coal Industry Report, 1Q 2005
China Electric Power Market Report, 2005
China Gas Industry Report, 2004-2005
China Electric Power Equipment Market Report, 2004
China Coal Industry Report, 2004
Source:佚名