In the modern business world, how hard can a business trip be? To take a flight across half the globe to a capital city in one country, and then take EMU train(Electric Multiple Unit) for roughly 2.5 hours, and then by car—or if there’s no such fine arrangement, by bus it takes you about almost one day to arrive at your destination. Here in China, it’s full of uncertainty with delays, hustlers looking to make quick a buck off a lost 老外, and no guarantee that in the trip you will find what you’re looking for.
Does this sound like the arduous journey the gold seekers took in the middle 19th century during the California Gold Rush? Maybe it is exaggerating to make comparison yet this is happening right here in Shandong province, China. The travelers, or the gold seekers if you will, are elite import traders who are working with the world’s top oil companies like BP, Shell, Total, Glencore etc., while the destinations are the private refineries which geographically litter the whole province, or as you can, more straightforwardly put, the purchasers of 80 million tons of crude oil annually.
Not like more than 150 years history of crude oil industry in major European and North American countries , it is for less than 3 years since Shandong Private refineries got national level permission and “quota” of crude oil importation and usage. This means that all of a sudden, a brand new market with capacity of roughly 80 million tons. This number gradually grows year by year depending partly on the government policy. It’s based on the assessment of development of private sector refineries and its influence overall on the environment and in terms of towing the party line.
What’s more exciting to the traders from top 20 oil companies, like a shark notices the taste of blood, the potential buyers are mostly new money and green-hands compared with their counterparts in the international market . On one hand, Shandong private refineries can be well funded due to the support from local government. On the other hand, due to lack of trading expertise and experience, the dealers and traders from Shandong private refineries have to beef up efforts to try to catch up with counterparts from 100-year history industry crocodiles. During this process, it might turn a government subsidized company into a relatively “very profitable” one. In China, the government has many more tools at it’s disposal. Many refiners require government-allotted quotas to import crude oil. Forget the interest rate hikes to slow down an over heated economy. The government can just reduce the quota for oil, and can constrict growth with a much faster response if it so chooses. On the other hand, they could stimulate with cheap oil just as well. Recent reports have come through the wire of massive stockpiles to be used for leverage with foreign oil producers.
As observers can see, a new gold rush is ongoing in petrochemical industry in Shandong province, China. If you are also in this energy industry or concerned about this field, should you be interested. The fight to secure valuable crude oil inbound is known. With China expanding it’s influence in the Middle East and Africa. Will the gold rush continue? This depends on if China can keep up it’s voracious growth. Assuming the PRC allows it to do so…
Leave a Reply