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Read it here first: China’s Latin American Oil Grab

Posted By Barry Ritholtz On March 1, 2005 @ 11:33 am In Commodities,Economy,Politics | Comments Disabled

"In recent months, though, China’s voracious economy has brought it to Venezuela, and much of South America, in search of fuel."

How’s that for a money quote to grab your attention? It comes from an article in today’s NYT (China’s Oil Diplomacy in Latin America [1]).

If you read it, you will recognize some of the issues. Last month, we discussed China’s Oil Grab [2] in  Russia and Venezuela. That comes on top of our May 16, 2004, discussion of Chinese Oil Demand [3].

Give credit to the NY Times for being the first of the majors to recognize this for what it is: a naked grab for scarce commodities:

"BOGOTÁ, Colombia, Feb. 28 – Latin America is becoming a rich destination for China in its global quest for energy, with the Chinese quickly signing accords with Venezuela, investing in largely untapped markets like Peru and exploring possibilities in Bolivia and Colombia.

China’s sights are focused mostly on Venezuela, which ships more than 60 percent of its crude oil to the United States. With the largest oil reserves outside the Middle East, and a president who says that his country needs to diversify its energy business beyond the United States, Venezuela has emerged as an obvious contender for Beijing’s attention.

The Venezuelan leader, Hugo Chávez, accompanied by a delegation of 125 officials and businessmen, and Vice President Zeng Qinghong of China signed 19 cooperation agreements in Caracas late in January. They included long-range plans for Chinese stakes in oil and gas fields, most of them now considered marginal but which could become valuable with big investments.

Mr. Chávez has been engaged in a war of words with the Bush administration since the White House gave tacit support to a 2002 coup that briefly ousted him. Still, Venezuela is a major source for American oil companies, one of four main providers of imported crude oil to the United States, inexorably linking the two countries’ interests."

And China is not stopping with just one country:


China’s Latin American Oil Manuevers

Venezuela     Oil
Chile     Tin
Bolivia     Gas
Brazil     joint operations in refining, pipelines and exploration gas pipeline
Bolivia     Shengli International Petroleum Development earmarked $1.5 billion investment fund
Ecuador     China National Petroleum and Sinopec oil blocks
Peru    China National Petroleum oil production; Also, memorandum of understanding for more exploration deals
Colombia     exploration and production

As many people blame "speculators" for the rise in oil prices, I
once again need to remind people that  China accounts for 40 percent of
global growth in oil demand over the past four years (Source: NYT,
DOE). I expect their demand to triple over the next 3 decades. At
present, China consumes 5.56 million barrels per day versus the United
States 20.4 million daily barrels. Of that amout, the US imports ~12
million.

Expect this to be an ongoing story. Those pundits who blame high oil prices on "speculators" remind me of the CEOs who blame their low stock price on the "shorts:"  Both groups are either fools, liars — or worse. 

>

Sources:
Penobscot Princess
Morning Comment — Tuesday, February 2, 2005
subscription only electronic distribution

China’s Oil Diplomacy in Latin America [1]
JUAN FORERO
NYT, March 1, 2005
http://www.nytimes.com/2005/03/01/business/worldbusiness/01oil.html


Article printed from The Big Picture: http://www.ritholtz.com/blog

URL to article: http://www.ritholtz.com/blog/2005/03/read-it-here-first-chinas-latin-american-oil-grab/

URLs in this post:

[1] China’s Oil Diplomacy in Latin America: http://www.nytimes.com/2005/03/01/business/worldbusiness/01oil.html?ex=1267333200&en=5e8910665db73ed9&ei=5090&partner=rssuserland

[2] China’s Oil Grab: http://bigpicture.typepad.com/comments/2005/02/chinas_oil_grab.html

[3] Chinese Oil Demand: http://bigpicture.typepad.com/comments/2004/05/chinese_oil_dem.html

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