China's Increasing Energy Demand Will Create Opportunities for Oil and Gas Firms

China’s increasing energy demand will continue to provide investment opportunities in the country’s oil and gas sector, according to a Maplecroft report.

 

China’s economy continues to offer good investment potential despite moderating GDP growth forecasts over the medium term. As the government focuses on strengthening macroeconomic sustainability, emphasis on economic development has shifted from chasing high growth rates to ensuring long-term stability. However, the report suggests that long-term sustainability hinges on how the government can restrain and reduce debts, especially those accumulated by local governments.

 

Securing energy resources to meet ever-rising consumption remains one of the priorities for the government. Incentives have been introduced to attract private and foreign capital in the downstream sector, though upstream activities still requires joint ventures with powerful national oil companies.

 

In addition, China is also seeking to explore unconventional hydrocarbon reserves, such as shale oil and gas. This presents fresh investment opportunities for foreign oil and gas companies. 

 

However, the high-profile corruption scandal in China oil industry highlights the elevated legal and reputational risk of foreign oil and gas companies operating in partnership with Chinese state-owned firms.

 

Growing political, economic and military power coupled with the necessity to ensure long-term energy security has prompted Beijing in taking a more assertive stance on a number of long-standing territorial disputes with its neighbours, most notably Japan. Although it is unexpected that Sino-Japanese relations will be moving towards positive direction over the short term, a full-blown armed conflict is very unlikely, given the potential of US military involvement. 

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