As China has become the largest oil consumer replacing the U.S., it is pertinent that the country starts thinking about its energy security. In the same direction now Chinese oil companies are competing in Brazil’s auction which is going to be held today. The giant Libra field in Brazil represents a change in strategy for Chinese oil companies in the sense that it will be their riskiest Latin American investment if successful.
Chinese oil companies are known for investing in safe oil fields; however, in Libra field two companies i.e. Cnooc Ltd. and China National Petroleum Corp. are contesting with nine other companies for what may become one of the world’s two largest deep-water fields. According to experts, if Chinese companies are successful in bidding, they would need to invest an estimated $185 billion.
Chinese Companies Would Need to do Heavy Investment if they Win the Bid
Heavy investments are definitely going to be a major contention for bidders; however, Brazil has vowed to press ahead with the auction of the first of its giant offshore oil discoveries which it is selling under a new regulatory regime. The country thinks that it will gain from the auction despite lower-than-expected industry interest and union opposition.
The union opposition has come from employees of Petrobras, the state-owned oil company. The employees at Petrobras contest that the impending auction of the Libra ultra-deepwater field to foreigners is not a good idea. According to estimates Libra holds as much as 12 billion barrels, or three years of China’s consumption.
As China’s energy requirements widen, the country will have to think of investing in riskier oil fields that will need a lot of investment. The other competitors of Chinese oil companies are Royal Dutch Shell Plc. and France’s Total SA. According to some energy market observers it is too big an opportunity for the Chinese companies to miss.
According to energy market observers winning the license to exploit oil in Libra field would shift strategy for Chinese state producers to one of drilling and developing new deposits. Currently, China’s state-controlled oil companies are not doing much of drilling in deep waters and this will be an opportunity and challenge as well.
According to Brazil’s regulator Libra field has a reserve of 12 billion. However, some skeptics say that the estimates are still based on relatively limited information and could be subject to important adjustments as more information becomes available.
To contact the reporter of this story: Jonathan Millet at firstname.lastname@example.org