Analysis Of The Driving Forces Of Chinese National Oil Companies’ Overseas Activites Business Structure, Investment, And Trade In African Oil

This thesis looks at Chinese energy security from the viewpoint of Chinese National Oil Corporations’ involvement in the African oil market. After establishing some characteristics of the bilateral trade and involvement through a study of empirical data, we attempt to explain each finding through a discussion of the influence that internal and external factors have on the decision-making process of the Chinese oil companies. We study time series of trade data between the two regions to discover whether China has been importing more oil from Africa than earlier, relative to the other source regions of South America, Central Asia, Russia and most importantly the Middle East. Imports from Africa have indeed been accelerating since the early1990s far above all regions except the Middle East. This, however, only holds true for crude, unrefined oil. In the case of refined finished petroleum products, China first of all imports relatively little as opposed to crude products, and it secondly mainly imports its refined oil from other developed Asian economies such as Singapore and South Korea-not from Africa or from the Middle East directly. A generalized study of export and import patterns show that this is a global trend; crude oil is easier and cheaper to transport and so the form in which most oil is traded internationally. We further find that much of the crude oil China takes out of Africa is not, in fact, transported home to satiate domestic demand. A large portion is sold on international or local markets by the Chinese National Oil Companies or their partners instead, as there are better prices to be found in there compared to those under Chinese fuel control, and as the distance and security risks of shipping routes between Africa and China are simply too costly. Instead, Chinese involvement in Africa is indirectly supporting energy security by establishing long term business relationships and making money for the purchase of oil closer to home. Thus we must study investment data and trends in mergers and acquisitions to attempt indirectly to discover how deeply invested Chinese oil companies really are in Africa. It seems that the three main parties involved in the decision-making process of Chinese overseas oil involvement; the central government, large financial institutions and the national oil companies, function together to produce a result based on a combination of national security concerns, commercial interests and developmental goals.