Chinese oil giants are in talks with Bahrain over developing assets in the country, but China should be cautious about overdependence on oil imports from the Middle East, an expert said on Sunday.
Bahrain has invited Chinese companies to invest in the country's oil assets, including a newly discovered oil field that reportedly contains up to 80 billion barrels of tight (or shale) oil, Bahrain's oil minister told the Global Times on Thursday.
"We have had talks with China National Petroleum Corporation (CNPC). I met the chairman a couple of weeks ago in India. We had a good discussion, and [after that] he sent a technical team to see what's available. We look forward to taking that [cooperation] further," Mohamed bin Khalifa Al Khalifa, the oil minister, told the Global Times.
Bahrain is also talking with Sinopec, another major oil and gas producer in China. "But most of the discussions so far have been with CNPC... We are very positive about the opportunity to do business with CNPC in Bahrain," he said.
Neither CNPC nor Sinopec commented as of press time.
Bahrain is reaching out to global investors to help the country explore its recently found oil and deep gas resources, located off the country's west coast. Bahrain so far is not sure how much oil and gas can actually be recovered from new assets.
"We are drilling two wells this year. We are talking with companies like CNPC to see what level of interest they have and to invite them to produce the oil with us," the oil minister said.
As well as the new discoveries, the Bahrain government is also inviting overseas companies to invest in the country's traditional oil and gas assets like the Bahrain Field, a major oil source for the country.
In 2016, Bahrain exported about 4.3 million-worth of refined petroleum to China, down from 3.3 million one year earlier, according to the latest available data from the Central Informatics Organization in Bahrain.
Bahrain's invitation comes as China is speeding up oil investment in the Middle East. According to a report by Reuters on March 21, PetroChina, a subsidiary of CNPC, will take a 10 percent stake in two of Abu Dhabi National Oil Company's offshore concessions under a 40-year agreement.
Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, said that China's oil imports from the Middle East currently account for about 40 percent of the country's entire oil imports.
"I think the Middle East, particularly Iran and Saudi Arabia, will be China's largest source of oil imports for a long time to come, not only because they have ample oil resources, but because of their relatively complete infrastructure network and the fact that China has been a long-term partner with them," Lin told the Global Times on Sunday.
However, Lin cautioned that China's oil imports have risen too fast in recent years, which carries risks as the political environment in the Middle East is not very stable.
"I think the Chinese government has not yet fully realized that for the sake of energy security, China should control its dependence on oil imports by increasing domestic oil supply as well as reducing oil consumption nationwide," he said.