Against the backdrop of weak global economic demand coupled with global economic uncertainties due to the Euro debt crisis and political tensions in oil producing regions of the world, the Chinese economy is beginning to show signs of slowing down. Respectable growth rates are still anticipated for 2012 and 2013.
The China energy market is dominated by three state-owned oil and gas companies (CNPC, Sinopec and CNOOC). China is the world’s second largest consumer of oil and gas, but only the sixth largest producer of the same. Some reports suggest that China will account for over 37% of the Asia-Pacific regional oil demand by 2015.
Currently, however, import levels of oil at more than 50% are widely considered an energy security alert. With China’s oil and gas Asia/Asia Pacificconsumption rising at an average of 7.5% per year in recent times, the China oil and gas companies will need to boost their output to meet China’s massive energy needs and reduce the nation’s reliance on oil imports. Faced with declining domestic oil reserves, the need to improve efficiency and productivity is gaining traction with the Chinese oil and gas companies. Additionally, China has also entered into strategic partnerships with international oil and gas companies in overseas upstream projects (including in unconventional energy resources) with a view to securing future energy supply.
The Chinese Government is also promoting the use of natural gas as a clean fuel. Prices of refined products and natural gas are regulated in China, and Chinese oil and gas companies cannot pass on high oil prices to consumers. At the same time, there is a significant tax burden on producers.
National oil and gas companies in the Middle East are entering into joint ventures with Chinese oil and gas companies with a view to secure an export market for oil (for these Middle East producers) as well as penetrating the Chinese market with petrochemical products.
PwC’s energy practice in China is centred in Beijing and Shanghai, with 340 industry professionals. We serve both domestic and international clients with audit and assurance, tax and consulting services.
Chong Heng Hon
Partner, PwC Hong Kong
Tel: + (10) 6533 2244