Brad Setser

Follow the Money

Cross border flows, with a bit of macroeconomics

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A new Chinese oil strategy? Buy into BP and other oil majors

by Brad Setser
October 28, 2005

I think this is potentially very good news.   It is not quite Tom Barnett's scenario – that would imply BP and Exxon buying up Chinese oil firms or building infrastructure to supply the Chinese markets so that they profit (or profit even more) from rising Chinese demand for oil.  That is not really happening.  China can finance its own oil infrastructure, thank you very much.  It also would like to finance the development of the new oil fields needed to meet growing Chinese demand.  But that is proving a bit difficult.  China has plenty of cash, but much of the oil that is left seems to reserved for the national oil companies of the producing country.  Other assets are owned by Western oil companies who got in early and who are not inclined to sell their cash cows right now.

So Chinese firms buying into western oil firms (and buying into their overseas reserves) – or just swapping assets — is a rather constructive way for China to address its concerns about energy security.  Better than cozying up to Iran.  Or Richard Clark's scenario.


  • Posted by Gcs

    i agree totally

    short run a share type trans nat entanglement
    might kool a few jetsonon both sides

    but if we go nose to nosesome day
    ala us/japan circa 1937
    which i assure you
    the party plans for

    the only joint projects creditable to the prc
    would be contiguous asian fields
    where the party might feel china held sufficent
    ” security ” high cards to hold their ground in a wrangle

    and yet in a spirit of” sharing”
    co- projects elsewhere
    with big oil trans nats might work anyway
    if they also open doors in “secure” fringe areas

  • Posted by Guest

    canadian tar sands are up for grabs tho and iirc china is helping buildpipelines from alberta to the pacific and there’s always africa…

    btw Economic Ties Binding Japan to Rival China, now shanghai isn’t china, much less beijing, but if say the ‘new pragmatism’ between china and taiwan can take hold between china and japan, a la singapore, then i think going ‘nose to nose’ someday diminishes somewhat.

  • Posted by paventa

    otoh, it looks like japan is finally ‘normalising the state‘ we’ll see how it goes in the east china sea

  • Posted by Gcs

    mystery guest:

    just want to mention

    mister lee of singapore…..

    an authentic geo economic wizard
    great interview

  • Posted by Guest


    nose to nose with uncle

    and as lee i feel politely implies

    if there’s a nose to nose any time sooner
    then 2030

    it’ll be uncle’s insufferable push push that caused it

  • Posted by Guest

    i actually kinda take comfort that they’re planning for ‘it’ (WE are too, obviously 🙂 cuz if they are (actively considering the implications) i think it makes ‘it’ much less likely to happen! zakaria lays out the promise and perils of china’s so-called “peaceful rise.”

  • Posted by Gcs

    “if they are (actively considering the implications) i think it makes ‘it’ much less likely to happen”

    right on !!!!!!