Jane Van Ryan
Posted December 29, 2009
This week's episode focuses on an Institute for Energy Research article that discusses China's recent upswing in investing in oil and gas resources outside its borders, while the United States promotes more investment in solar and wind power.
Use the audio player below to listen to information about the article and follow along with the show notes. I hope you find the podcast informative.
01:00 The Chinese are doing a number of things. Internationally, they are working with countries that have oil and gas resources, providing them with loans in exchange for energy. The Chinese call this their "loan for energy" program. For example, recently, Nigeria's presidential advisor for energy indicated that Chinese companies have proposed investing 50 billion dollars in exchange for six billion barrels of oil reserves. They are also investing in oil and gas pipelines and in liquefied natural gas terminals. Oil pipelines are being built from Russia and Kazakhstan into China; they have already built LNG terminals in China and others are currently under construction. Domestically, they also are building coal, nuclear, hydro, wind and solar plants to ensure that they will have enough electricity to fuel their economy. There are reports that they are building two plants a week.
01:56 China's not endowed with much oil and gas resources. Regarding oil, China has 16 billion barrels of reserves, which is about 1.2 percent of the world's total.
02:09 With respect to natural gas, they have about 80 trillion cubic feet of reserves, or about 1.3 percent of the world's total. China is now the world's largest market for automobiles; they've surpassed the United States, and they need petroleum to fuel those vehicles.
02:51 The global recession has spurred opportunities, and the Chinese are taking advantage of them. Oil prices are lower now than they were in early and mid-2008, and that makes asset prices lower, and that favors acquisitions. The Chinese also are less constrained than many of their international counterparts in where they can invest. For example, they can invest in Iran. And also, financing is not an issue since Chinese banks are willing and able to provide funds.
03:23 I've already mentioned that they're purchasing them [oil and gas assets] in Nigeria and Iran, but there are other places they've either made deals or are in the process of making deals. They include Iraq, Kazakhstan, Venezuela, Argentina, Russia and Brazil. For example, they've lent Brazil $10 billion to further its offshore exploration in return for 160,000 barrels a day. They've lent Russian countries 25 billion dollars to supply about 300,000 barrels per day from fields in East Siberia. And they've contributed 8 billion dollars to Venezuela in exchange for increasing Venezuelan exports to China by 650,000 barrels per day. They're interested in oil sands in Canada which we're currently importing but policies in the United States may limit those imports, such as the low carbon fuel standard or a cap and trade bill. They also are looking into leases in the Gulf of Mexico. Devon Energy is looking to sell some leases they have there, and the Chinese are interested in purchasing those.
04:37 The U.S. strategy is one for energy security and environmental protection, but we're looking towards energy independence through conservation and renewable technologies, particularly wind and solar power. And we're slowing down development of our oil and gas resources.
05:26 Early in February, the Department of the Interior rescinded 77 oil and gas leases in Utah. Later in October, they announced that they would lease 17 of them. Again in February, the Department of the Interior delayed for six months the development of a new five-year drilling program for offshore oil and gas. Then, towards the end of February, the Department of the Interior canceled a new round of commercial-scale research development leases in Colorado, Wyoming and Utah for shale oil. Toward the end of October they issued a new program that decreased lease acreage by 87 percent and provided very difficult timelines for investing in new research. Another example is that the Omnibus Public Lands Management Act was signed in March, and it prohibited energy production in over 3 million acres of federal land.
06:30 Wind and solar are generating technologies, and they can't replace petroleum in their industrial and transportation uses. Further, wind and solar have low capacity factors compared to other traditional technologies, such as coal, gas and nuclear. As a result, you need more installations of them to get the same amount of energy, and that requires more land usage. And they're more expensive than traditional coal and gas technologies. They also can cause instability on the grid, particularly with wind, and that's because we can't predict exactly when wind is going to blow.
07:16 Most of the jobs they've [the administration] created are during the construction phase, and thus they're temporary jobs. Most of the component parts made are being made offshore.
08:17 I think Americans should be concerned. The Chinese realize that in order to fuel their economy that they need affordable energy. That's true for the U.S. We need all forms of energy. And as you can see, the Chinese are making it a priority to build generating plants and to get oil and gas resources offshore. And they're doing that without legal or administrative delays.
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