The People of America's Oil and Natural Gas Indusry

China Invests in U.S. Oil and Gas

Jane Van Ryan

Jane Van Ryan
Posted October 18, 2010

China has overtaken the United States as the world's largest energy consumer, according to the International Energy Agency (IEA). The executive director of the IEA Nobuo Tanaka said last week, "Probably half of the oil demand increase comes from China." (Reuters)

This fact is important to U.S. consumers because China's growing energy demand is encouraging the country's nationally owned oil companies to go on a worldwide shopping spree for oil. Their latest purchase is a multibillion-dollar stake in the South Texas Eagle Ford oil and natural gas play. As reported in the Houston Chronicle last week, CNOOC is investing $2.2 billion for a third of Chesapeake Energy's assets in the field that could produce up to a half a million barrels a day of oil equivalent.

China not only will obtain the rights to the energy, but also it will get access to American expertise in the technologies that produce oil and natural from hard rock formations, including horizontal drilling and hydraulic fracturing. In return, Chesapeake gets much-needed capital. Chesapeake's CEO Aubrey McClendon called the purchase a "simple business transaction...[it's] something the government should be very happy to see, which is the return of American capital into our country so that we can use it to create high-paying American jobs and also reduce oil imports a few years down the road."

Maybe so. But while China is investing in U.S. reserves, drilling companies are still waiting for permits to explore in the Gulf of Mexico. Why? According to Investor's Business Daily:

"Our economy, equally thirsty for energy, is left high and dry by a government more interested in saving the planet than America...So we'll provide [China] with the technology to develop their oil resources at the same time we restrict our own exploration and development."

Sen. David Vitter (R-La.) predicts that the administration will "preside over a continuing de facto moratorium for months or years, with new drilling held back to a fraction of previous levels." And in the meantime, China will reap the benefits of America's abundant natural resources.