Oil Is Like Milk; China Has No Need to Buy Cows

What needs to be considered is whether it makes sense for any Asian nation to make the purchase of energy- producing assets a cornerstone of its foreign policy when the economics of this global oil-hunt may itself be dubious.

According to three McKinsey & Co. consultants, if China manages to keep domestic production from its aging fields at the current level, it will need to buy 3 percent of the world’s proven petroleum assets — more than the combined reserves of BP Plc, Chevron Corp., Exxon Mobil Corp., Royal Dutch Shell Plc and Total SA — to meet projected demand until 2025.
Even if China were promised home delivery of all the overseas crude it needed, where would it receive the commodity and how would it be refined?

“To keep up with surging demand, the country needs to build a large, technologically world-class refinery every year for the next 15 years, at a cost of about $2 billion apiece,” the McKinsey researchers said.

Energy security isn’t merely about extracting the crude. It extends to transportation, storage, refining, trading and retail. Things could go wrong at any stage.

Bloomberg