Commentary by Eric Wilder – China appeared on the energy radar screen earlier this year when it made a bid to buy the American oil company UNOCAL.  Though unsuccessful, the bid highlighted several facts:  1) China is second only to the U.S. in consumption of fossil fuels, 2) China has the fastest growing major economy in the world and, 3) China is rapidly becoming a major competitor to the U.S. in the exploration for fossil fuels.

CNOOC Ltd. announced Tuesday that its parent company, China National Offshore Oil Corp., has signed a partnership with Canadian company Husky Energy Inc. to drill a deep exploratory well in the South China Sea about 185 miles south of Hong Kong.  If successful, it would become China’s first deep-water offshore oil field.  CNOOC Ltd. also has similar agreements with Oklahoma-based oil companies Kerr-McGee and Devon Energy.

CNOOC’s announcement exemplifies the world’s energy conundrum – there is a finite amount of crude oil available for consumption while the demand for the product is suddenly soaring.  The price of crude oil is up today on the news of continued cold weather in the U.S.  Marketers should take heed that there is yet another factor controlling the upward price of crude – an Asian giant thirsty for oil.

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