China's oil and gas explorers look to Africa to satisfy expanding appetite for fuel

Chinese petroleum companies have doubled their efforts to secure foreign fuel reserves to cater for that country's ever increasing oil and gas demands. This is according to a Deloitte report released last week on China's demand for oil and gas and its impact on Africa.

The findings of the report show that China imports more than half of its oil, and that the country has spent more than $65 billion (R453bn) purchasing foreign oil and gas assets. Africa would receive the bulk of this investment.

The Deloitte survey, titled Fuelling for Recovery - A review of outbound oil and gas M&A activity from China, reveals that the bulk of deals fell into the "large" category, which consists of disclosed deal values of more than $500 million.

According to the report, Chinese oil companies China National Petroleum Corporation and PetroChina have declared that they planned to spend nearly $460bn on purchasing overseas assets in the next decade.

The report adds that this trend is set to continue because the growth of domestic consumption has outstripped the rise in production and no new domestic exploration projects are being planned for the foreseeable future.

Yu-Dong Yuan, the oil and gas director for Deloitte in China, said Chinese national oil companies would buy up international assets for the next 20 years.

"They find it prohibitively expensive to buy inputs from global spot markets, preferring to lock in a stable supply source, primarily from buying upstream raw assets.Anton Botes, a director and leader of the oil and gas industry unit of Deloitte Consulting in Africa, said: "Africa is in many respects seen as the last frontier, with its oil and gas reserves attracting the attention of many large companies around the world."

Botes said these companies had good reason to show interest because 12 percent of the top 500 African companies in 2009 were involved in the oil, gas and petroleum industry and had collectively generated an annual turnover of $148.7bn.

Botes added that the focus on African oil and gas reserves was a wise and strategic long-term decision both for China, which needed oil and gas outputs, and Africa, which needed foreign direct investment.

"Chinese authorities have made it clear that they are committed to the development of Africa and are not only interested in its resources," he said.

Martyn Davies, an analyst at African-focused capital advisory, strategy and research company Frontier Advisory, said Chinese national oil companies were looking to invest in Africa as one of the few remaining regions where large scale oil and natural gas targets were still available for purchase.

He added that by buying up African oil and gas assets, China would also be able to curry favour with its fastest growing export market, which was expanding by more than 30 percent a year.