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.
Chinese companies have invested in Iraq, the United Arab Emirates and Iran in recent years, and have expressed interest in oil and gas projects in Saudi Arabia and Qatar. The resumption of sanctions by the U.S. 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 U.S. penalties. Chinese companies are also interested in a $1.5 billion refinery upgrade in Iran.
The tilt east has been in the making for more than a decade as China’s economic expansion accelerated. U.S. and European companies still dominate the Middle Eastern oil and gas 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 percent, 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 favor of the cleaner fuel, BP said in its latest report in June.
Chinese companies have a long way to go to displace Western companies that have operated in the Middle East for over a century. They will still need Western expertise and are partnering with the majors such as BP and Total to extract the oil, and then are using ownership stakes to secure the supplies.