Chinese oil companies have been shut out of the vast Caspian Sea oilfields. It is a salutary lesson for them. In March, the China National Offshore Oil Corp (CNOOC), and then Sinopec, China's third- and second-largest oil companies respectively, announced plans to buy identical 8.33 per cent stakes in the Kashagan oilfield in a part of the Caspian Sea controlled by Kazakhstan. Each company committed US$615 million to buy into the biggest oil discovery of the past three decades.
The deals would have added a massive 1.1 billion barrels of oil to each of the companies' proven reserves. At a stroke, CNOOC would have increased its reserves by 50 per cent, and Sinopec by 28 per cent. But in the middle of last month, just before the deals were about to close, the other members of the international consortium that owns the Kashagan field exercised their contractual right to block the purchases.
The decision was made even though several consortium partners have ambitious plans in China. Shell and ExxonMobil, for instance, both hope to build petrochemical plants (serving China's booming industrial market) and operate large networks of petrol stations (exploiting the world's fastest-growing car market).
CNOOC, in particular, had threatened the consortium partners with the loss of business in China if they dared to cancel its entry into Kashagan. Yet in the end, industry sources say, the foreign companies were only too delighted to lock the Chinese out and keep more of the Caspian riches for themselves.
Why? There are two reasons. First, in oil and gas matters, China has plenty of potential, but a poor track record. Oil exploration opportunities are limited and China has been notoriously stingy in allowing foreign companies to participate.
The real opportunities are downstream: in refining, petrochemicals and retail sales of petrol and lubricants. But here again, China has been very slow to grant market entry to foreign companies. The China revenues of major oil companies are negligible, and their actual investments, so far, are not much to talk about. So, oil and gas is one game where 'the China card' is not a trump.