Geopolitical changes and the decline in crude oil prices are mostly positive for China, Deloitte Touche Tohmatsu Limited said in a report.
The ripple effects of the North American energy boom are being felt across the Middle East, Russia and China, which will result in new sources of supply, increase competition, reshape the global geopolitical landscape and create greater interdependencies among nations, Deloitte said in the 2014 Oil and Gas Reality Check released on Monday.
Meanwhile, the United States is likely to maintain its overseas commitments to police the sea lanes critical to China, which can continue to take a free ride on the US naval supremacy, the report said.
While the shale gas development helped increased US energy supply, it offers the country more leverage, allowing it to intervene only in regional conflicts of its choosing and increasing its bargaining power in diplomatic negotiations over Middle East issues. Meanwhile, Middle East crude oil exporters are increasing deals with Asian countries rather than Western ones.
The increased competition would exert pricing pressure on Russia and other gas exporters, resulting in lower overall gas prices for Europe and further blunting Russia’s energy influence in Europe.
For China, its oil and gas industry is in the midst of a change which includes a series of significant reforms and a possible restructuring, Deloitte said.
Focusing on energy security, China is speeding up its exploration and development activities both offshore and onshore. Possessing vast shale resources, the country is strengthening its upstream as well as its refining and chemical capacity.
“The growing economy will continue to place strong demand on energy as the country’s transportation and chemical sectors lead the way. It is therefore widely accepted that the consumption curve will continue its advance upwards,” said Adi Karev, Deloitte’s global head of oil and gas and China energy and resources managing partner.
Concerns about supply competition with the US have been moved into the future. The planned Chinese shale gas revolution could shift such competition concern to the far horizon, Deloitte said.
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