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Editorial comment

In the world of international business dealings, the newly emerging relationship between China and Iceland seems to be flourishing. China’s state-owned oil company, CNOOC, has been progressing its interest in exploration in the Arctic region, and has recently joined with Eykon Energy, a young Icelandic company, in a bid for an offshore exploration licence in Northeast Iceland. If the partnership qualifies for the round, the licence is expected to be awarded this Autumn. Earlier this year, Iceland became the first European country to sign a free-trade agreement with China, and China has since become a permanent Observer at the Arctic Council; an intergovernmental forum for Arctic governments and peoples, which currently only admits 12 non-Arctic countries as ‘Observers’. Observers may propose projects through an Arctic State or a permanent participant, but financial contributions from Observers to any given project may not exceed the financing from Arctic States.

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China is certainly making proactive efforts to find partners in O&G ventures around the world. CNOOC and other Chinese oil companies held meetings with Russia’s state-controlled OAO Rosneft head, Igor Sechin, during his visit to China earlier this year about potential offshore projects in the Russian Arctic. In addition, Philippines-based company Philex Petroleum Corp. has said it has been holding discussions with CNOOC to form a partnership to explore and develop the gas-rich Recto Bank (80 miles from Palawan in the Philippines) although these talks remain preliminary, and any agreement formed between the two companies would have to respect the laws and regulations set by their respective nations. Unfortunately, the target exploration area, which contains a large amount of gas-rich deposits, is the subject of a territorial clash between China and the Philippines, with China consistently claiming that it has, “Indisputable sovereignty over the West Philippine Sea islands and their surrounding waters.” China is currently favouring investment into gas resources and moving away from more polluting resources like coal, as the country endures domestic and international pressure to clean up air pollution problems and diversify its energy mix.

CNOOC’s multi-billion dollar takeover of Canadian oil firm Nexen, approved late last year, marked another movement by China into Canada’s oil reserves and China’s biggest overseas acquisition to date. However, Canadian Prime Minister Stephen Harper intimated that the deal was done with some reluctance on behalf of his Administration. When announcing the outcome of the deal, he said, “This is not the beginning of a trend, this is the end of a trend […] to be blunt, Canadians have not spent years reducing ownership of sectors of the economy by our own governments only to see them bought and controlled by foreign governments instead.” Investment by China, on a large scale, into the Canadian O&G industry is still an unknown undertaking for both parties, and future investment possibilities rely on the skilful management of existing deals.

China does seem to be making some moves towards increased transparency in its international business dealings, although it will continue to come up against oil producing nations suspicious of its motivations and reluctant to cede too much control to China. This will undoubtedly change in time, with the ebbs and flows of the global political and economic composition. Some things just need a little getting used to.