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China-CELAC energy cooperation needs greater efforts

(People's Daily Online)    09:59, January 14, 2015

The First Ministerial Meeting of the Forum of China and the Community of Latin American and Caribbean States (CELAC) was held in Beijing on Jan. 8 and 9, 2015, marking a new chapter in the comprehensive strategic partnership between China and Latin America. There is a great deal of synergy between China and CELAC in the energy field. Sino-Latin American cooperation should therefore focus on energy.

China has become the biggest energy producer and consumer in the world, and is becoming more dependent on foreign countries for petroleum and natural gas. Meanwhile, in Latin America, oil fields have been discovered in the seas off Brazil, oil and gas resources are being explored in Venezuela, and market reform of energy institutions in Mexico is promoting production of oil and gas. Latin America is gradually becoming a major refiner of oil and gas. Statistics indicate that confirmed oil reserves in Latin America are 338.11 billion tons , representing almost one quarter of total world reserves.

In view of the increasing surplus of oil and gas in Latin America, countries in those region urgently need to cooperate with China, in the hope that the Asian market, including China, can fill the role of a stable, lasting and reliable partner and help them break the export market monopoly of the U.S. Latin America not only seeks to enlarge its exports of crude oil but also to attract Chinese capital and technology.

Although energy cooperation between China and Latin America offers high potential and good prospects, the process still faces some difficulties.

First of all, transport costs are high due to the long geographical distance between China and Latin America. Liquefied natural gas needs to be stored at 161 degrees Celsius below zero and to be transported in specially-adapted ships. The further it has to be transported, the less econoimic it becomes. Secondly, the U.S. regards Latin America as its "backyard", and of critical importance to American energy strategy. Therefore, China and the U.S. should seek to establish a consensus if China and Latin America want to promote energy cooperation. Furthermore, the atypical conditions experienced in oil and gas exploration in Latin America are challenging and costly. Moreover, Venezuela has plentiful supplies of heavy oil, but China lacks the capacity to refine it. The relevant laws and the market environment are not yet mature, and there is resource nationalism and trade protectionism in Latin America. In addition, Latin America has been experiencing a recession in recent years, leading to worries about the domestic security environment.

Taking account of history, culture and region, Chinese enterprises must pay careful attention to relevant policy changes in the area, and choose the appropriate methods of cooperation. Government intervention will be necessary in some cases.

The article is translated and edited from《人民财评:提升中国拉美能源合作还要迈多道坎》, source: People's Daily Online, author: Huang Xiaoyong, Dean of Graduate School of Chinese Academy of Social Science and Director of Research Center of International Energy Security.

(For the latest China news, Please follow People's Daily on Twitter and Facebook)(Editor:Yuan Can,Yao Chun)

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