Broader Energy Cooperation with Latin America.doc

1、1Broader Energy Cooperation with Latin AmericaTHE energy policy set out in Chi-nas 12th Five-year Plan (2011-2015) is widely expected to swingthe door open to cooperationwith resource-rich Latin American coun-tries,which have already experienced aninflux of Chinese investment and ordersin years past

2、.The recent purchasingspree of Chinese oil companies in SouthAmerican countries like Brazil and Ar-gentina in 2010 is a reminder that thegrowing partnership is in both parties in-terests,Chinese capital flooding into thecontinent and its aspiration to developnew energies at home are offering strongi

3、ncentives for home-grown technical in-novations and development of the energyindustries of its trade partners. In the coming years China-LatinAmerica (LA) cooperation on energy will remain focused On petroleum and gas,but also extend to electric infrastructure,hy- dropower and bio-energy.There is a

4、sus- tained need for investment in off and gas explorations in LA countries to buttress their energy exports,a major source of their revenues.But fed by domestic con- sumption and strong growth in the farm- ing and mining industries,the demand for power for their own purposes is also soaring.It all

5、adds up to 2supply pressure that is already complicated by obsolete in-frastructure and uneven advances in their production capability.As a result,several countries in the region have reported regional power crisis in recent years.A remedy looms in partnership with China,whose comparative advantages

6、 in termsof market,finance,technology and experi-ence could ease the situation.Chief Oil Importer. The traction in global economic growthis being provided by the emerging econo-mies of the Asia-Pacific,which is increas-ingly drawing on crude oil from LatinAmerica.Chinese customs statistics showthat

7、Chinese imports of their etude wentup from 837,9oo tons in 2o03 to 13.07million tons in 2oo9,pushing up theirshare of Chinas total imported crudefrom 0.92 percent to 6.5 percent.Duringthe months from January to November2011,China purchased 17.71 million tonsof etude oil from LA,which amounts to8.11

8、percent of.its total imported erode forthe period.Accepting this trend of grow-ing dependence on foreign crude,Chinaplans to expand its strategic reserves ofoil and gas during the 12th Five-year Planperiod,which is bound to mean morebuying from LA in the coming years. Emerging Supplier of Moneyand T

9、echnology 3With the dual goal of meeting a surg-ing domestic demand for power andincreasing the added value of their pe-troleum products,most LA countriesare reshuffling their energy sectors,anendeavor that requires intense inputfrom technological and financial sectors.In 9009 and 9010 China made se

10、veralloans related to this drive,to Brazil,Ecuador and Venezuela.In 2008 ChinaNational Petroleum Corporation (CN-PC)established a joint venture in Costa Picato upgrade,reconstruct and expand the state-owned Moin refinery,so as toenhance its processing capacity,and im-prove product quality and enviro

11、nmentalprotection. According to incomplete statistics in9OLO,Chinese oil companies made ninebig-ticket deals,either acquisitions orshare purchases,in LA countries at avalue topping US $18 billion.In Decem-ber that year Chinas State Grid Cor-poration established its Brazil HoldingLtd.a gambit to expa

12、nd its involvementin Brazils power industry.The grow-ing presence of Chinese businesses inLA,it is believed,will galvanize energysector infrastructure construction andindustrial upgrading on the continent,particularly with respect to oil and gasexploration,pipeline construction andthe overhaul of 4r

13、efineries.In the case ofBrazil,China can also be a strong part-ner in deepwater drilling and equipmentmanufacture. Clean Energy Opens NewCo-op Territory China has pledged to shackle its car-bon emission per unit GDP by 4o to 45percent off the 2005 level by 2090,andmeanwhile raise the contribution of

14、 non-fossil energy in its consumption profile to15 percent.To this end,more policies areexpected to be rolled out in the comingyears to support undertakings in energyefficiency and environmental protection. Several LA countries,headed by Bra-zil,are pacesetters in bio-energy tech-nologies.Brazil and

15、 Argentina are nowthe worlds top ethanol and bio-dieselexporters.They can expect to find readymarkets for both their expertise andproducts in China.Bolivia and Chile areflush with lithium,vital to electric carmanufacture and a key component inChinas new-energy drive. China also has plenty to offer t

16、o LAcountries: its strength in photovoltaiebattery making,advanced technologiesfor hydropower facility construction andmature equipment manufacturing see-tors are all coveted by the sun-drenched,water-.abundant continent. 5Imbalance to Be Addressed Despite the disparity in their politi-cal and econo

17、mic systems,China and LAcountries share a strong desire for eco-nomic development,and perceive sub-stantial potential for collaboration in thatregard.Friendly political relations are pre-requisites for this collaboration,but thenecessary conditions are not the sufficientones.The 12th Five-year Plan

18、declaredChinas intention to promote internationalinvestment by Chinese companies underthe conditions of adherence to standardmarket rules and with the involved enter-prises showing the organizational will andalignment to undertake the responsibility.Such conditions indicate that China willstand by t

19、he principles of ideology-freeand mutually beneficial engagement inLatin Americas energy sector. Fickle policies often feature in inter-national cooperation agreements on en-ergy with some of these countries,whichposes risks that should not be underes-timated by investors.Stable and clearpolicies ar

20、e the cornerstone of a healthy investment environment and vital formaking reasonable evaluations and reli-able projections. 6Three other issues also need greaterattention and prompt action.First,Chinais a strategic market for major off produc-ers in LA with their eyes on diversifyingtheir clientele

21、for the sake of better exportsecurity.However LA oil so far accountsfor a mere nine percent of Chinas totaloff imports.Second,energy cooperationbetween the two sides is still confined topetroleum and natural gas; new energiesare perceived as a trifling concern.Third,LA countries look forward to more

22、 directinvestment from China.Chinese capital isindeed funneled into the region throughmergers and the acquisition of shares,but that is a far cry from having a promi-nent presence on LAs foreign direct in- “vestment stage. Lessons learned in Africa and CentralAsia indicate if the obstacles to Chinasability to fully tap into the comparativeadvantages of their energy industries per-sist,the investment desire will be damp-ened,and consequently Latin Americawill miss out on some opportunities inthe future global energy market.