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Rise of the Asian NOCs
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Chinese and Indian pursuit of African oil is well-documented, but other Asian National Oil Corporations, particularly Malaysia’s Petronas and the Korean National Oil Corporation are steadily increasing their presence. Adam Green reports
Asia’s share of global oil consumption doubled between 1970 and 2006 as a consequence of rapid economic growth in Japan, the ‘East Asian Tigers’ and, latterly, China and India. Domestic supplies are fast depleting and the region is consuming three times more oil than it can produce domestically. Only Vietnam, Brunei and Malaysia remain net oil exporters.
Import dependence is expensive for high-consuming, industrialised OECD countries like Japan and South Korea, whose 2004 oil imports were equivalent to 12 percent and 13 percent of their exports of goods and services respectively. More worrying are price rises which could destabilise less economically developed Asian countries. “High oil prices adversely affect growth, employment, external accounts, and fiscal positions of governments that subsidise or tax domestic oil consumption,” says Jong-Wha Lee, chief economist at the Asian Development Bank.
One problem presents a systemic risk: Asia is beholden to the volatile Middle East for around 77 percent of its oil imports, a far higher dependency than other regions. By comparison, the Middle East supplies 24 percent of Europe’s oil imports and 17 percent of US oil imports.
In response, Asian National Oil Companies began expanding their overseas activity in the 1990’s, primarily to diversify fuel supplies and hedge against price volatility but also to increase competitiveness and establish new value chains. The ‘heavy sweet’ crude found in sub-Saharan Africa is attractive because it matches that used in many Asian refineries. Although less established in Africa than private international oil companies, ANOCs have certain tactical advantages. They are willing to go into pariah states like Sudan, from which US and European IOCs are deterred by sanctions or collateral risks. Some IOCs – notably Chevron – have withdrawn from Sudan and relinquished their assets to ANOCs. Tapping government treasuries, ANOCs can submit bids with signature bonuses that IOCs could not justify to shareholders – ANOCs dominated a major Libyan bid round in 2005 for this reason.
