The Malaysian Reserve

China gets another shot with Total’s Iran exit

By BLOOMBERG

DUBAI • Total SA’s withdrawal from Iran’s giant South Pars gas field has given China another chance to secure a stake in the world’s most coveted energy assets: Abundant and low-cost Middle Eastern oil and gas (O&G).

Chinese companies have invested in Iraq, the United Arab Emirates (UAE) and Iran in recent years, and have expressed interest in O&G projects in Saudi Arabia and Qatar.

The resumption of sanctions by the US on Iran has presented new opportunities, starting with the option to take control of South Pars after Total failed to secure an exemption from the US penalties.

Chinese companies are also interested in a US$1.5 billion (RM6.13 billion) refinery upgrade in Iran.

The tilt east has been in the making for more than a decade as China’s economic expansion accelerated. US and European companies still dominate the Middle Eastern O&G business, but their home countries are less reliant on the fuel. China, and other fast-growing nations in Asia, need the energy, and are increasingly bidding for concessions and joint ventures in the Persian Gulf region.

China’s demand for oil almost doubled in the past decade, while Middle East producers kept their market share at about 43%, according to BP plc’s Statistical Review of World Energy data.

Natural gas consumption is also booming as China strives to improve air quality by reducing its reliance on coal in favour of the cleaner fuel, BP said in its latest report in June.

Here are some of China’s forays into Middle East energy:
• Iran: China National Petroleum Corp (CNPC), which has a 30% stake in Phase 2 of South Pars, will become the majority shareholder.
• UAE: Shanghai-based CEFC China Energy Co Ltd and CNPC won a combined 12% of Abu Dhabi’s US$22 billion oil concession last year
• Iraq: CNPC is developing Iraq’s biggest oil field, together with BP. China Petroleum & Chemical Corp, known as Sinopec, also pumps oil in the Kurdish region.