Motivations behind China's Foreign Oil Quest: A Perspective from the Chinese Government and the Oil Companies

Motivations behind Chinas Foreign Oil Quest:A Perspective from the Chinese Government and the Oil Companies

SHAOFENG CHEN

China economic boom has produced a surging appetite for fossil fuels, particularly oil. To foster and sustain its economic development, China has taken a series of steps to quench its thirst for energy. The most striking measure is its high-profile oil diplomacy, centering on the goal of gaining more secure national control of overseas oil and gas supplies. Why has China chosen oil diplomacy over directly purchasing oil on the international market? And why does one prefer direct control of oil and gas? This paper attempts to address Chinas motivations from the perspectives of both the central government and the national oil companies (NOCs). It is argued that Chinas oil diplomacy has been driven not only by the governments learning skill and strategic concerns, but also by the NOCs strong commercial motives to expand business abroad and their managements personal incentive. Although both actors have common stakes in securing oil and gas from abroad, this by no means can guarantee that the NOCs will obediently follow state orders.

Key words: China, oil diplomacy, Chinese oil companies, motivation, government-business interaction

Together with its booming economy, China has developed a surging appetite for oil and gas. This has led to its growing dependence on foreign energy resources. The increasing reliance has spurred China to accelerate efforts to gain more secure national control of foreign oil and gas supplies. In practice, three options are available for a country to secure oil and gas, namely, by trade, by oil diplomacy, and by force. Why does China deem it necessary to conduct oil diplomacy over the reliance on trade or the resort to force? And also why does China prefer the way of direct control primarily in the form of so-called equity oil?

There is a large body of literature addressing Chinas oil diplomacy. Most studies either take a static view of Chinas motivations, identifying both the government and the national oil companies (NOCs) as the same interest entity, or regarding the latter merely as an extension of state policy.1 Consequently, they tend

Shaofeng Chen is a Research Officer at the East Asian Institute, National University of Singapore. He is a PhD...