The Oil and the Glory

The Weekly Wrap — July 20, 2012 (Part II)

The West zigs, China zags: The West is erecting tariff barriers to prevent Chinese renewable energy companies from dumping their products. What is China’s reaction? To set its sights on the developing world. So far at least, this may be one of the few win-win areas in the East-West relationship. In May, the Obama administration ...

Joel Saget   AFP/Getty Images
Joel Saget AFP/Getty Images

The West zigs, China zags: The West is erecting tariff barriers to prevent Chinese renewable energy companies from dumping their products. What is China’s reaction? To set its sights on the developing world. So far at least, this may be one of the few win-win areas in the East-West relationship.

In May, the Obama administration imposed 26 percent tariffs on Chinese-made steel towers that support wind turbines. Regulations and tariffs like these have made it challenging for Chinese wind companies to penetrate the U.S. or Europe, one result of which is that European manufacturers account for 89 percent of the installed wind capacity on the continent. That is good news for Western turbine-makers.

But it is only part of the story — 63.5 percent of new wind capacity last year was installed outside North America and the European Union. And in these areas, Chinese manufacturers have the advantage. Chinese companies accounted for 30 percent of global wind turbine sales last year, and they hold four positions among the world’s top ten turbine manufacturers (including Nos. two and three, Sinovel and Goldwind, respectively). Much of this success has come at home — 44 percent of new capacity was in China itself last year. But Ming Yang Power Group is also partnering with India’s Reliance Group to develop 2.5 gigawatts of wind energy in India. In Argentina, Chinese turbines and financing are building Latin America’s largest wind-power project. And Hydro China has been assessing a wind farm project in Ethiopia. Lower costs account for China’s success in frontier markets. Chinese-state financing helps Chinese companies to underbid Western rivals by 20 percent to 30 percent, report the Financial Times’ Leslie Hook and Pilita Clark.

This bifurcated global market appears likely to grow, providing scope for both Western and Chinese companies to continue to compete side by side, according to Pike Research. Western companies still have the edge when it comes to integrating wind farms into electricity grid systems. Pike’s Dexter Gauntlett told us: "With the switch to renewables, whole systems are going to change, and there will be a big market for Western tech and products."

Go the the Jump for the rest of the Wrap.

Does Exxon + Chevron mean the jig is up in Baghdad? Chevron says it has bought two oilfield blocks in the Kurdistan region of Iraq. This comes eight months after ExxonMobil made a similar play, signing a big exploration deal with the isolated and oil-rich northern region.  There is just one problem — Baghdad, where the central government is situated, has prohibited foreign oil companies from signing such deals without permission, and in neither case was there authorization. On paper, there is much at stake. Already, Baghdad has excluded Exxon from an April oilfield auction, and if it wishes, it can also penalize a pre-existing Exxon deal to develop the 8.6-billion-barrel West Qurna field in southern Iraq. While Chevron itself has signed for no Iraqi projects as yet, it has bid to develop a 4.4 billion-barrel field called Nassiriya, and also is looking at the rehabilitation of a Basra chemical plant. Yet is either company materially exposed? When Exxon went into Kurdistan, we thought it was a big gamble. But two makes company, and so many months down the road, it looks more like Baghdad has no teeth. Look for more companies to take the plunge in Kurdistan.

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