Canada-China Trade: Petroleum, Gas, Energy

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Table of Contents

Introduction
Petroleum
Natural gas
“Clean” Energy
Other Minerals
Summary
Works Cited

Introduction

China’s rapid economic growth has created a huge demand for energy and mineral resources. Canada has been part of China’s quest for energy security because it has vast amounts of these raw materials. China’s bilateral relations with Canada and the sound political relationship that both countries share has increased mineral and energy trade between both countries (Berrah 112). This trade has mainly spanned across the petroleum, natural gas, and clean energy sectors. Systematically, this paper explores the nature of this economic partnership by explaining its characteristics and highlighting potential areas of growth.

Petroleum

Canada is a big global oil producer and exporter. In fact, outside the Middle East, the country stands out as the biggest oil-producing nation in the developed world (Thompson 188). The North American economy exports about 283,000 cubic meters of crude oil, daily, to several destinations around the world, including China (ENERDATA 13). China is a strategic partner in Canada’s energy industry because it is the single largest oil consumer in the world. However, its energy trade with Canada was largely non-existent before 2009. In fact, statistics show that the US was the main export market for Canadian oil exports. Detailed statistics show that Canada exported up to 99% of its oil products to the US (CBC 4). However, because oil demand has either stagnated, or decreased, in America, there has been a renewed interest by Canadian oil companies to export to China.

The latter now accounts for about 2% of the country’s oil export market (PwC 2). Besides directly importing petroleum products from Canada, Chinese investors also directly invest in Canadian oil companies (Ek 22). Most of such investments have involved acquiring offshore Canadian petroleum firms. Nonetheless, PwC (2) says that, so far, China has invested more than $30 billion in the Canadian petroleum industry. Most of these investments have included some big Canadian oil corporations, such as “Syncrude, Athabasca Oil Sands and Penn West Energy” (CBC 4).

The greatest challenge facing Canada is its landlocked oil transport network. For many decades, the Canadian government has only invested in building oil pipelines to transport its oil to the US. There are no direct oil pipeline networks leading to the country’s sea ports, for direct exports to China (PwC 2). Such investments are urgent, but it would take the country several years to build such networks. Some Chinese firms have decided to fund some of these infrastructure projects. For example, one Chinese state-owned firm, Sinopec, is funding a big infrastructure project by Enbridge (a Canadian oil firm).

The Northern Gateway Pipeline (the name of the project) intends to develop an oil pipeline from Alberta oil fields to the shores of Kitimat (PwC 2). From there, Canada will ship its oil to China. Lewis (2) says this pipeline would allow Canada to export more than 300,000 barrels of oil (daily) to China. Although the country is pursuing short-term measures of transporting its oil to US shores for export to China, the potential for more trade with the “Asian tiger” exists if it invests in building local oil pipelines for transporting petroleum products to its seaports. Overall, experts believe that Canada would be a reliable and dependable oil supplier to China (CBC 4).

Natural gas

Similar to America’s declining oil demand, Canada has also experienced a declining demand for its natural gas products, mostly in the US. This situation has forced it to look for alternative markets in Asia (mainly China). China has a huge demand for Canadian natural gas products. In fact, Canada (alone) cannot meet this demand because experts say the Asian country has a 400% growth rate of LNG demand, annually (PwC 3).

This fact shows that the LNG trade between Canada and China is one-sided because China imports this product from Canada, but the latter does not do the same. The Canadian LNG industry is similar to the oil industry because its potential for growth depends on infrastructure expansion. Indeed, similar to the oil industry, the Canadian LNG sector experiences bottlenecks because of infrastructure constraints. If Canada eliminates these limitations, it could easily increase its exports to China. This development would improve the level of cooperation between both states.

“Clean” Energy

Canada has been a leader in the production and adoption of “clean” energy. In this regard, more than 78% of Canadian “green” industries are export-focused (FATD 4). China has benefitted from Canada’s production capacity for green technology because it has imported about $3 billion worth of “clean” technology, from the North American state, to boost its energy sector. The World Bank (cited in FATD 4) says that this figure represents a 10-fold increase in clean energy trade between the two countries. Most of the imported technology has benefitted China by improving its competency in wind power generation. For example, it has imported many gearboxes for its wind turbines, from Canada (FATD 4). China has also benefitted from its trade with Canada by importing electrical control parts (FATD 4).

In fact, FATD (4) says China has reported a 158% increase in imported “green” technology goods (from Canada), since 2009. In an unrelated study, FATD (4) compared the rate of import growth for clean energy products between the two countries with the rate of bilateral relations growth and found out that the latter trails the former. Cooperation between both countries has occurred at different intergovernmental levels. However, there is more opportunity for growth between both countries. For example, FATD (4) says “clean” energy partnerships are becoming globally desirable. In fact, experts estimate that they will be worth about $3 trillion in 2020 (FATD 4). Although Canada and China have collaborated in different aspects of “clean” energy development, evidence shows that there is potential for the two countries to use the same technology for carbon capture and energy storage (FATD 4). Similarly, both countries could use the same technology to exploit marine energy. Overall, both countries could reap immense benefits in this regard.

Other Minerals

While oil, LNG, and “clean” energy products are some natural resources that Canada exports to China, other Canadian exports to China include mineral products, such as nickel, copper, and potash (CBC 3). These exports account for 25% of Canadian exports to China (CBC 3). Furthermore, they are worth about $4 billion (CBC 3). There is potential for increasing this value of exports because the Chinese manufacturing sector is growing, thereby demanding increased mineral imports from Canada.

Summary

This paper has highlighted the nature of the Canada-China trade in energy and mineral resources. It shows that the trade is mainly one-sided because most of these products flow from Canada to China. Understandably, China needs these raw materials for its vibrant manufacturing industry. However, the two nations need to increase their cooperation in this regard because there is a lot of untapped potential for exporting more energy and mineral products to China. This untapped potential stems from years of non-diversified investments that only focused on improving the Canada-US trade, while neglecting the potential trade with the rest of the world. Now that Canada is “looking east,” increasing its infrastructure investments and shipping capabilities to China would greatly deepen its level of bilateral trade with China.

Works Cited

Berrah, Noureddine. Sustainable Energy in China: The Closing Window of Opportunity, Washington, DC: World Bank Publications, 2007. Print.

CBC. What does Canada trade with China? 2012. Web.

Ek, Carl. Canada-U.S. Relations in Focus, New York, NY: Nova Publishers, 2008. Print.

ENERDATA. Canada Energy Market Report, New York, NY: Enerdata, 2014. Print.

FATD. Canada-China Economic Complementarities Study. 2013. Web.

Lewis, Jeff. Even without Northern Gateway pipeline, Canada could still get its oil to China: IEA. 2014. Web.

PwC. Oil and Gas Export Challenges. 2013. Web.

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