BusinessWeek has a great article explaining China’s investment in the oil fields of Iraq.
BP is the largest partner in the venture, but only by a dipstick: It has a 38% stake, while the Chinese hold 37% (the rest is owned by an Iraqi company). The media focus has been on BP’s decision to take up the Rumaila challenge for a low fee of only $2 for every barrel the venture produces. But the more important story could be China’s role. “CNPC’s involvement brings together the country with the most rapid growth in energy demand in history with the country that plans the greatest buildup of production capacity ever,” says Alex Munton, an Iraq specialist at Edinburgh-based oil consultants Wood Mackenzie.
There’s also some interesting information about China’s commitment to training workers who can work in the oil industry.
China is the low-cost provider in the industry. “As a general rule of thumb, Chinese management and labor costs are about one-third if not one-fourth of Western costs,” says Gao, the ex-CNOOC executive. Nine colleges and universities focus exclusively on oil studies in China: “The Chinese treat the industry as a life-and-death issue,” says Gao. The Western oil industry’s workforce is aging rapidly. “Analysts always mention that the oil majors face personnel shortages,” says Xu Xiaojie, an independent oil and gas adviser in Beijing. “In China we have a surplus.”
The Iraq ventures still face formidable obstacles—sectarian strife, corruption, and government instability, among them. The Iraqis also may not welcome large numbers of Chinese to their fields. “Yes, bringing in low-cost engineers is China’s advantage,” says Trevor Houser, a partner at the Rhodium Group, a New York-based research firm that studies India and China. “But that has created tensions [elsewhere]. Look at Zambia, where an election was pretty much fought over China.”
It will be interesting to see this play out.
