Editorial: Where Dragons Dare And Oil Bleeds The Ice
"Never laugh at live dragons." - J.R.R. Tolkien (1892 – 1973)
Last week 1.3 billion people rang in the Year of the Sheep (or Goat) across the length and breadth of the People’s Republic of China. Hundreds of millions of Chinese ventured back to their native towns and villages in the world’s largest annual human migration. The world’s greatest economic power and biggest energy consumer also feted the Lunar New Year with an announcement that should haven shaken the oil and gas world to its core.
In the midst of an oil price downturn cycle that sees Brent crude at less than $60 per barrel and West Texas Intermediate (WTI) at less than $50, China has mooted the merger of its two largest petrochemical corporations, PetroChina (a subsidiary of the Chinese National Petroleum Corporation) and Sinopec.
Should this come to pass, the unification of these two partially state-owned entities would mark two turning points for the country: a wholesale renationalisation of the Chinese hydrocarbon sector and the formation of the largest oil company since Standard Oil.
This new Chinese petrogiant would instantly be catapulted into the big leagues of the oil producing world, a leviathan that would stand aside the five supermajors not just as an equal but, in many cases, as a superior.
In terms of revenue, the new venture would both turn over and control double the asset value of its nearest rival. In terms of workforce, the amalgamated corporation would employ more than double the staff of the five supermajors combined.
As China expands its oil producing interests from North America to the North Sea and North Africa, the foundation of its own supermajor might be the next logical step. The nation is already the largest net importer of crude oil and dependence is set to rise from 60 per cent in 2015 to 75 per cent or - 13 million barrels per day - by 2035.
With that in mind, and taking into consideration that the People’s Republic recently signed a deal with Russia for a share of lucrative Arctic exploration licenses, the possibility of a Chinese petroleum colossus will draw few sniggers from oilmen and politicians alike.
How would a Chinese supermajor shake up the oil and gas world? Have your say here