Business / Companies

Continent ripe for exploration

By Zhong Nan (China Daily) Updated: 2014-09-09 07:02

Shandong-based Kerui Petroleum finds a wealth of opportunities in South America, Zhong Nan reports in Dongying, Shandong.

For many private-sector Chinese companies, South America offers a wealth of potential and a less competitive environment. Energy machinery producer Shandong Kerui Petroleum Equipment Co is among those companies.

Kerui Petroleum is contemplating the construction of a $500 million oil equipment plant on the continent in the next three years.

The Dongying-based company is one of China's largest private-sector oil and natural gas equipment and extraction service providers by sales.

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It has 49 subsidiaries around the world and 10 global service centers in energy-rich nations such as Kazakhstan, Russia, India, Algeria and Indonesia, where it makes the equipment needed to extract oil and provide oilfield services.

It is expanding its footprint around South America, including Venezuela, Argentina, Brazil, Colombia and Ecuador.

Vice-Chairman Xia Tongmin said that because China is far from South America, only a few Chinese companies are able to operate in this emerging market.

"The continent has abundant crude oil and natural gas reserves that really can benefit local people through refining and processing these resources and selling them directly to the domestic and world markets, instead of shipping them to another country for refining or letting Western companies dominate the industrial chain," Xia said.

Latin American nations, including Venezuela, Argentina and Colombia, all want to raise their living standards, and one way they aim to do that is by upgrading their infrastructure and research facilities. Importing equipment can increase oil output and optimize the energy sector.

Bai Xuefeng, director of the trade department at the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, said: "From a long-term perspective, Latin American governments can use the money generated by an independent and fast-growing energy industry in other sectors. Doing so will help create jobs and build an industry chain in a sustainable way."

In China's huge domestic market, three State-owned energy giants - China Petrochemical Corp (Sinopec), PetroChina Co Ltd and China National Offshore Oil Corp - use their dominant position to generate big profits. But so far, these organizations have shown scant interest in South America, although they have established operations in Africa, the Middle East and Central Asia.

By comparison, the nation's large private-sector energy companies such as Kerui, Shanghai-based Wison Engineering Services Co Ltd and Yantai Jereh Oilfield Services Group Co Ltd have shown strong interest in Latin America, said Bai.

The political situation in South America is stable, and most countries have friendly relations with China. The continent's ports and roads, credit ratings, government transparency levels and trade tariff rates are better than those of Africa or Southeast Asia, Bai added.

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