With U.S. domestic oil production surging to nearly multidecade highs and with domestic demand more or less flat over the past five years, America's role in driving global oil demand is diminishing.
Taking its place are China, which recently surpassed the U.S. to become the world's largest oil importer, and India, which is poised to become the world's largest importer of coal within the next decade, according to the International Energy Agency, or IEA.
China and India to drive global energy demand
Though growth in China and India has slowed substantially in recent years, both nations are still expected to grow at a much faster pace than the developed world. Going forward, the IEA projects that China will remain the world's largest oil importer for quite some time, based on expectations of continued strong economic growth and an emerging middle class.
According to energy consultancy Wood Mackenzie, Chinese oil imports will grow to 9.2 million barrels per day by 2020. Meanwhile, U.S. oil imports are projected to keep declining as the nation substitutes imports with domestically produced oil, courtesy of the shale revolution.
As a larger share of Chinese and Indian citizens rise out of poverty, they will buy more cars and demand more oil. OPEC projections show Chinese car ownership set to rise by more than 380 million vehicles by 2035, which equates to roughly 320 cars per 1,000 people. Indian car ownership is also expected to grow at a similar rate.
Chinese oil companies expanding aggressively
To meet the nation's ravenous demand for oil, Chinese oil companies have embarked on an acquisition spree, buying up oil and gas assets all over the world, especially in the U.S.. Since 2009, Chinese state-owned oil companies such as China National Offshore Oil, or CNOOC (NYSE: CEO), and Sinopec (NYSE:SHI) have spent more than $100 billion on acquisitions, according to Thomson Reuters data.
Some of the biggest recent acquisitions by Chinese companies include PetroChina's (NYSE: PTR) bid for interests in three Peruvian oil and gas fields from Brazil's Petrobras (NYSE:PBR) for $2.6 billion; the purchase of an 8.33% stake in Kashagan, the massive offshore oil field in the Caspian Sea, after ConocoPhillips (NYSE:COP) decided to sell its interest in the project for $5 billion in order to pursue liquids-rich opportunities in the U.S.; and Sinopec's purchase of a $3.1 billion minority stake in Egyptian oil and gas fields operated by Apache (NYSE:APA), which will use the proceeds from the sale to pay down debt, repurchase shares, and accelerate North American drilling activity.
China keen on U.S. shale
In addition to these large global acquisitions, China has also focused a great deal of resources on acquiring interests in U.S. shale properties, often through joint-venture agreements with U.S.-based companies. In fact, Chinese companies have spent roughly $5.5 billion since 2008 on shale oil and gas projects in the U.S., making China the largest foreign investor in the shale boom here.
Earlier this year, Sinopec inked with a deal with Chesapeake Energy (NYSE:CHK) under which it received a 50% undivided interest in a large portion of Chesapeake's acreage in the Mississippi Lime formation for roughly $1.02 billion. Similarly, CNOOC struck a deal with Chesapeake back in 2010 that gave the Chinese giant a one-third undivided interest in a portion of Chesapeake's Eagle Ford acreage for $1.08 billion in cash at closing.
In addition to securing more reserves to quench China's thirst for oil, Chinese state-owned oil companies are pursuing these joint-venture agreements with U.S.-based companies to gain more expertise in shale drilling so they can more efficiently exploit shale reserves in their own country. According to estimates by China's Ministry of Land and Resources, China possesses roughly 880 trillion cubic feet of recoverable shale gas reserves, compared with approximately 480 trillion cubic feet for the United States.
Rising demand means rising opportunities
Over the next several years, countries outside the Organization for Economic Cooperation and Development, most notably China and India, will increasingly drive global demand for energy. To meet rising domestic demand, Chinese state-owned oil companies have expanded aggressively, purchasing oil and gas assets all over the world. Furthermore, as China moves to exploit its sizable domestic shale reserves in the years to come, it will need a great deal of help, creating lucrative opportunities for well-positioned oil-field services and equipment firms.
Fool contributor Arjun Sreekumar owns shares of Chesapeake Energy. The Motley Fool recommends Petrobras. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.