Over the last decade, the oil consumption needs of India and China have increased exponentially. However demand outstrips supply in both the countries which has led to energy security emerging as a key focus area. In recent months both countries have been outbidding each other to acquire promising oil& gas reserves across borders, across continents.
China has emerged as the clear leader in this race on the strength of its vast capital reserves and availability of cutting edge oilfield services technology. Also at the macroeconomic level the Chinese government has been more aggressive in development of human potential for oil& gas sector as compared to the Indian government. So in this race for energy, how can India Inc. compete with China?
One word- talent.
India’s pool of technically proficient, English speaking engineers have been well utilized in the Business Process Outsourcing and technology offshoring industry. This very pool could be a potent weapon for Indian corporations in the oil & gas space as well. There are a couple of models for this:
• Indian IOCs (a rare bird, India based international oil companies, but I think we’ll start seeing more of these in the coming years) can use in-house talent to help drive and deliver on their international expansions. What would set them apart for other IOCs? Access to cost effective people and processes that they have perfected in their home country. Host countries and governments are looking for knowledge transfer, and this could be a vehicle for that.
• India based services companies can leverage the knowledge base and cost model to compete with other services organization, particularly in SE Asia and the Middle East. Schlumberger has already been sourcing top Indian field engineers for international deployment very effectively over the last decade
• International services companies could build centers of excellence within India. A good model to follow could be IT companies like IBM and Accenture who have built practice hubs in India to support worldwide service delivery. The growth in digitization of services to the energy industry is a trend that can lift a lot of boats in India.
Some forward leaning organizations have already started down this path. If the stars align over the next couple of years in terms of regulatory regimes, hydrocarbon prices and the broad demographic shifts in India, then India Inc. could be a force to reckon with in the global energy industry.
Showing posts with label China. Show all posts
Showing posts with label China. Show all posts
Thursday, February 25, 2010
The Elephant & the Dragon
Wednesday, June 24, 2009
Chinese petroleum producers expanding inorganically
Sinopec today announced a tender offer for Addax Petroleum of Switzerland. Addax management has okayed and recommended the deal to shareholders. Addax has some valuable assets in West Africa and Iraq, both areas where GET has been extending our business, and so of particular interest to us.
Seems like the dragon's expansion is likely to continue, as predicted in a previous post by Ian Rushby. Will there be a nationalist pushback like the Rio Tinto or CNOOC- Unocal deal, or would the invisible hand of the market triumph?
Seems like the dragon's expansion is likely to continue, as predicted in a previous post by Ian Rushby. Will there be a nationalist pushback like the Rio Tinto or CNOOC- Unocal deal, or would the invisible hand of the market triumph?
Tuesday, February 24, 2009
Thirsty Dragon- China’s Energy Security
In little more than a decade China has changed from being a net exporter of oil into the world's second-largest importer, trailing only the United States. Despite the current economic slowdown the country’s oil demand is still forecast to grow by 2.3% this year. With some of the world’s largest and fastest growing cities and an emerging middle-class, demand is coming from both consumer and industrial sectors, including rapidly expanding automobile ownership. This growth in demand cannot be met from domestic production - currently domestic crude oil production supplies only two-thirds of the country’s needs. China’s government estimates that it will need 12 million barrels/day of crude oil by 2020 from the current demand of 7.95 mb/day (IEA).
Securing stable access to oil and gas supplies has become central to China’s economic growth which in turn underpins political stability. So China has been looking outside, in different corners of the world, to find its energy supplies. Until recently the country focused primarily on the Middle East for oil supplies. It was one of the few countries trading with the former regime in Iraq and had large production sharing contracts which were cancelled with the US and allies invasion in 2003. China has also been doing deals in Iran; earlier this year a Chinese state-owned enterprise signed a $2 billion deal to develop the Azadegan field. Nevertheless China recognizes the geopolitical issues and the significance strategically of the Middle East for both the United States and Europe so has set its sights on other areas. China has been prospecting aggressively in the Caspian region and Africa.
Although Africa holds only about 9% of the world’s total proven oil reserves compared to more than 60% in the Middle East, it may hold significant untapped resources. From 2002 to 2003, trade between China and Africa doubled to $18.5 billion; by 2007, it had reached $73 billion – including substantial crude oil imports from Sudan and other African countries. Hydrocarbon rich African countries have decade long relationships with Western oil companies. Wood Mackenzie estimates Chinese companies hold under 2 percent of Africa's known oil reserves – many of these assets were previously held, explored and relinquished by the IOCs. And much of the potential resource growth is in technically challenging deepwater blocks in Angola and Nigeria.
China’s share of Africa’s oil is however growing. Two factors have been driving this. Firstly China’s foreign policy of non-interference in the domestic affairs of its trading partners. Sudan’s government resisted international pressure over its actions in Darfur. How significant was the combination of China’s veto in the UN Security Council and the export of 60% of Sudan’s oil production to China? China also uses aid to provide leverage, supplying easy credit and development knowhow in places as diverse as Gabon and Congo. The Council on Foreign Relations put out a very thoughtful paper last year detailing the growth of Sino-African relations. Oil is the common denominator and China is expected increasingly to use a combination of aid, trade and knowledge transfer to expand its influence in the region and increase its imports. Will the new Obama administration’s clearly stated preferences for reducing its oil import dependency and diversifying to alternative sources of energy give China an opening to construct more deals and expand its presence in Africa in the coming years?
We’ve also recently seen China adopt a model of more direct ownership, fully or partly, of foreign companies. The US congress shot down CNOOC’s attempt to buy into Unocal during the last phase of industry consolidation - but that was in a very different world and has not stopped China’s NOCs from evaluating other options. Will the announcement earlier this month of Chinalco’s proposed massive investment in Rio Tinto be a precursor of similar deals in the oil & gas industry ?
About the author:
Ian Rushby had a 30-year career in BP plc where he held various business leadership, commercial, planning and control positions in BP’s Head Office and Exploration, Finance, Coal and Gas divisions, working in London, the Netherlands, Indonesia, USA and Russia. His most recent assignment was Group General Auditor of BP plc, reporting to the Group Chief Executive, the Board Audit Committee and the Ethics and Environment Assurance Committee. He is also a non-executive Director, Ministry of Defence, UK and Chairman of the Defence Audit Committee.
Securing stable access to oil and gas supplies has become central to China’s economic growth which in turn underpins political stability. So China has been looking outside, in different corners of the world, to find its energy supplies. Until recently the country focused primarily on the Middle East for oil supplies. It was one of the few countries trading with the former regime in Iraq and had large production sharing contracts which were cancelled with the US and allies invasion in 2003. China has also been doing deals in Iran; earlier this year a Chinese state-owned enterprise signed a $2 billion deal to develop the Azadegan field. Nevertheless China recognizes the geopolitical issues and the significance strategically of the Middle East for both the United States and Europe so has set its sights on other areas. China has been prospecting aggressively in the Caspian region and Africa.
Although Africa holds only about 9% of the world’s total proven oil reserves compared to more than 60% in the Middle East, it may hold significant untapped resources. From 2002 to 2003, trade between China and Africa doubled to $18.5 billion; by 2007, it had reached $73 billion – including substantial crude oil imports from Sudan and other African countries. Hydrocarbon rich African countries have decade long relationships with Western oil companies. Wood Mackenzie estimates Chinese companies hold under 2 percent of Africa's known oil reserves – many of these assets were previously held, explored and relinquished by the IOCs. And much of the potential resource growth is in technically challenging deepwater blocks in Angola and Nigeria.
China’s share of Africa’s oil is however growing. Two factors have been driving this. Firstly China’s foreign policy of non-interference in the domestic affairs of its trading partners. Sudan’s government resisted international pressure over its actions in Darfur. How significant was the combination of China’s veto in the UN Security Council and the export of 60% of Sudan’s oil production to China? China also uses aid to provide leverage, supplying easy credit and development knowhow in places as diverse as Gabon and Congo. The Council on Foreign Relations put out a very thoughtful paper last year detailing the growth of Sino-African relations. Oil is the common denominator and China is expected increasingly to use a combination of aid, trade and knowledge transfer to expand its influence in the region and increase its imports. Will the new Obama administration’s clearly stated preferences for reducing its oil import dependency and diversifying to alternative sources of energy give China an opening to construct more deals and expand its presence in Africa in the coming years?
We’ve also recently seen China adopt a model of more direct ownership, fully or partly, of foreign companies. The US congress shot down CNOOC’s attempt to buy into Unocal during the last phase of industry consolidation - but that was in a very different world and has not stopped China’s NOCs from evaluating other options. Will the announcement earlier this month of Chinalco’s proposed massive investment in Rio Tinto be a precursor of similar deals in the oil & gas industry ?
About the author:
Ian Rushby had a 30-year career in BP plc where he held various business leadership, commercial, planning and control positions in BP’s Head Office and Exploration, Finance, Coal and Gas divisions, working in London, the Netherlands, Indonesia, USA and Russia. His most recent assignment was Group General Auditor of BP plc, reporting to the Group Chief Executive, the Board Audit Committee and the Ethics and Environment Assurance Committee. He is also a non-executive Director, Ministry of Defence, UK and Chairman of the Defence Audit Committee.
Thursday, January 15, 2009
The expat life in China
Despite the global economic slowdown, China continues to grow, although at a slower pace. To maintain the pace of industrialization requires energy, particularly hydrocarbons. China has acquired E&P interests in in regions as varied as Kazakhstan, Russia, Venezuela, Sudan, West Africa, Iran, Saudi Arabia and Canada. Numbers of downstream and upstream facilities are increasing to keep pace with its rising oil consumption, driven both from industrial demand as well as a burgeoning transportation market (The passenger vehicle market is growing at a 7-10% rate over a base of 15 million cars on the road).
As the energy industry booms in China, so is the number of expatriates working in that industry. The country is undergoing high speed modernization and along with it, many cultural changes.
I lived in Southern China for a year as an expat manager at Schlumberger. It was an eye opening experience for me, both professionally and personally. My wife, who had accompanied me, still feels that it was the best foreign posting location for us. The standard of living was particularly high. We also forged some long term & close knit relationships with other expat families there.
However I would urge any expats to venture out of the “expat ghetto” and get to know the real China. Mandarin is the primary language spoken by a vast majority of people in China. The language can be a bit tricky for someone to pick up initially particularly if you’re not used to East Asian languages. Most taxi drivers do not speak or read English. The best solution is to have the address of your destination written in Chinese. I used to carry cards with common words written on it to help me move around the city. It is not that hard to develop workable Mandarin in a couple of months. However, if you are looking for fluency, I recommend attending a language school.
Finding out about expat life in China is easier these days with various online forums and communities. The new visitor can get some valuable tips through these forums. I recommend Dan Washburn’s blog Shanghaiist . Dan’s a freelance writer but has some interesting stories, and slice of life vignettes, and tips for the recently arrived resident in China.
If you are considering taking up projects in China, my advices is set aside all your preconceptions about the country and discover first hand the exciting, wonderful and the sometimes exasperating experience there.
As the energy industry booms in China, so is the number of expatriates working in that industry. The country is undergoing high speed modernization and along with it, many cultural changes.
I lived in Southern China for a year as an expat manager at Schlumberger. It was an eye opening experience for me, both professionally and personally. My wife, who had accompanied me, still feels that it was the best foreign posting location for us. The standard of living was particularly high. We also forged some long term & close knit relationships with other expat families there.
However I would urge any expats to venture out of the “expat ghetto” and get to know the real China. Mandarin is the primary language spoken by a vast majority of people in China. The language can be a bit tricky for someone to pick up initially particularly if you’re not used to East Asian languages. Most taxi drivers do not speak or read English. The best solution is to have the address of your destination written in Chinese. I used to carry cards with common words written on it to help me move around the city. It is not that hard to develop workable Mandarin in a couple of months. However, if you are looking for fluency, I recommend attending a language school.
Finding out about expat life in China is easier these days with various online forums and communities. The new visitor can get some valuable tips through these forums. I recommend Dan Washburn’s blog Shanghaiist . Dan’s a freelance writer but has some interesting stories, and slice of life vignettes, and tips for the recently arrived resident in China.
If you are considering taking up projects in China, my advices is set aside all your preconceptions about the country and discover first hand the exciting, wonderful and the sometimes exasperating experience there.
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