Sino-Latin American Energy Cooperation Models

Dr.Sun Hongbo Institute of Latin American Studies Chinese Academy of Social Sciences

Woodrow Wilson International Center May 26, 2010

• How do the Chinese national oil companies and the Chinese government view further investment in Latin America?

• Are there obstacles? • What are the expectations for the future?

• Are the Chinese NOCs concerned about political risk?

The dynamic roles in Sino-Latin American energy cooperation

• Strong Economic Growth

• NOCs √• Governments

• Financial Organizations √

Strong Economic Growth

Governments NOCs Financial

Organizations

Go Globally

Local Market

Profit-making

Energy Security

Cooper Promoting

Policy Service

Go Globally

Local Market

Financial Service

Profit-making

Cooperation Models

• Technical Service Model √• Joint Development Model • Infrastructure Building Participation Model √• Loans for Oil Model• Bio-fuels Technology Joint Research Model

How importance of Latin America for China’s energy security?

• Latin America only accounts for 7.58% in China’ total crude oil importing around the world in 2008, according to BP Statistical Review of World Energy June 2009.

• It is difficult to image that Latin America will become a highly strategic region for China’s energy security needs.

China Oilfield Services in Mexico

China-Venezuela Energy Cooperation

Sinopec and PetroChina in Ecuador Sinopec in Columbia

Cooperation Programs by Country

Exploration Development Service Contract Loans for oil

Peru ★ ★

Venezuela ★ ★ ★ ★

Ecuador ★ ★ ★ ★

Columbia ★ ★

Brazil ★ ★ ★

Mexico ★Argentina ★

• CNPC has been present in Peru since 1993 and now owns a risk exploration block and two production blocks in the country's Talara Oilfield, while also providing oilfield services.

CNPC owns the risk exploration Block 111/113 and production blocks 1-AB/8 and 6/7 in Peru's Talara Oilfield.

• China’s Expansion of Contracting Engineering in Mexico

By the end of 2007, the total amount of China’s contracting engineering services was of 1.264 billion USD, with a total turnover operation amount of 1.819 billion US dollars.

There are 3 important oil companies with contracting engineering services in México now. Their main business are to provide services for oil projects and the operation of drill machines.

• The Great Potential in China-Columbia Cooperation for Petroleum and Petrochemical Industry

The investment to Columbia petroleum exploration and production by China's petroleum companies has become the new spot with more and more attentions of the two countries. MECL (Masarovar Energy Columbia Ltd.) is a joint venture company of Sinopec International Petroleum Exploration & Production Corporation and OVL Corporation of India.

• Sino-Venezuelan energy cooperation is an important component of bilateral cooperation.

Thanks to the support the two governments and the joint efforts of enterprises, both sides have deepened fruitful cooperation in oil exploration and development, engineering technology services, trading, transportation and refining, etc.

• Great Potential in China-Ecuador Energy Cooperation

The subordinate enterprises of Sinopec and PetroChina are playing a very important role in the cooperation with Ecuador in the field of energy. They have created many new drilling records when providing the exploration and drilling services for Ecuador and other foreign petroleum companies.

On February 28, 2006, Andes Petroleum Company, the joint venture of Sinopec and PetroChina, purchased all the oil and gas assets of Canada Encana Company in Ecuador successfully.

• The joint action plan 2010-2014 between China and Brazil states that the two sides agree on the great potential in investment cooperation in the energy sector.

The two sides will promote and extend the two countries’ cooperation in oil trade, oil exploration and development, financing, engineering services and equipments.

China and Brazil will cooperate in developing new sources of energy, in particular renewable ones (wind, solar, hydropower and biofuels and biomass).

Opportunities for Future

For China’s part• (1) High Economic Growth • (2) China’s NOC Investment Capacity

• (3) NOC’S Localization Experiences √

For Latin American Part• (1) To keep energy industry open• (2) Insufficient investment in exploration, developme

nt and refinery

• (3) Political Willingness √

Challenges for China’s NOCs• Policy Uncertainty • Regulatory Framework• Social Risks • Intense Market Competition• Environmental Clauses• Transportation Costs• Technology of refinery• U.S Response ?

Thank You