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Financial Times: BP follows the global thirst for energy: “Royal Dutch Shell has about $3bn (£1.72bn) invested in China across all its businesses, which span from selling lubricants and petrochemicals, to operating gas pipelines.”: Thursday 13 October 2005

 

By Thomas Catan

Published: October 13 2005

 

There are 1.28bn reasons for BP to be interested in China.

 

These people use more oil than any other nation except the US and Japan, accounting for about 6.5 per cent of global consumption.

 

China is an important producer of oil as well - the fifth largest - accounting for nearly 5 per cent of global production. But even that substantial output is dwarfed by the country's enormous thirst for energy.

 

The country moved from being a net oil exporter to a net importer in the early 1990s. Since then, its consumption has soared further, rising by about 5.5 per cent annually throughout the past decade.

 

By the year 2030, the US Energy Information Administration expects China's oil consumption to reach 10.5m barrels a day, displacing Japan as the world's second-biggest consumer.

 

So it is no surprise that international oil companies are keen gain access to this vast market. Royal Dutch Shell has about $3bn (£1.72bn) invested in China across all its businesses, which span from selling lubricants and petrochemicals, to operating gas pipelines.

 

Last month, Total of France signed a joint venture agreement with Sinochem to set up a network of 300 service stations in eastern China.

 

BP might want a new partnership with Sinopec but it has been in the country since 1973 and has about $3bn invested there.

 

Its Chinese operations include fuel retailing to producing and importing liquefied natural gas, supplying aviation fuel and operating chemical plants.

 

BP has formed retail joint ventures with state-owned companies such asPetroChina, a subsidiary of CNPC, as well as Sinopec. When both state-owned companies were partially floated in 2000, BP took a 2 per cent stake in each for about $1bn. It has since sold its shares at a handsome profit.

 

BP hopes to be closely involved in the growth of the liquefied natural gas business in China, as well as gas pipelines. It is looking for outlets for its gas from Indonesia and Australia. BP has a stake in China's first LNG terminal in Guangdong, due to start bringing in gas from Australia next year.

 

For now, BP has only one upstream interest in China - a non-operating stake in the Yacheng-13 gasfield in the South China Sea, operated by CNOOC and supplying gas to Hong Kong. However, it does not expect to be given significant new access to oil and gas production, which remains largely in the hands of national companies.

 

"China is a very important market for BP, where we have a very long history and expect to expand primarily through partnerships with domestic Chinese companies," the company says.

 

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