Chinese Oil Firms Bid for Repsol's Argentine unit

Chinese oil conglomerates China National Petroleum and Cnooc have offered to pay an estimated $17 billion usd for all of Repsol YPF's state in its Argentine unit called YPF.

You can read the Wall Street Journal's paraphrased article (the original costs money) at thestreet.com, by visiting this article.

Will this deal actually be completed? China South America reported on this possible deal back on July 7, 2009. You will notice, the offer at this point was only $14.5 billion for a 75% stake. China has since upped the offer and is now looking to buy the entire thing.

Why China? Are you angry over Australia rejecting your Rio bid? Are you feeling flustered that countries from the industrialized world, but also in Africa and Latin America are starting to think twice about selling the rights to their raw materials?

I don't blame them, after all, Australia is quite similar to South American commodity producing countries. Two note worthy and simple similarities include

1. A large portion of GDP is generated from commodity exports
2. The relative strength or weakness of domestic currencies such as the Ausie Dollar, Argentine Peso, Peruvian Sol and Brazilian Real, are all inherently linked to the global market price of the commodities the countries export. [ie: if the spot price for copper drops 50%, observe what happens to Peru and Chile's Peso's.
   

According to the WSJ article, the main obstacles to this deal include

• Spain is hesitant to see some of its best assets in Argentina be sold to China

• Argentina's government has no financial stake in YPF, but nonetheless under Argentine law has the right to veto decisions such as transfer of ownership. In my personal opinion, this translates into who is willing to pay more “under the table” to the Argentine government.

• China National Petroleum and Cnooc are state owned organizations. Despite their growing influence and presence in oil markets around the world, many governments still remain weary of doing business with companies officially tied to a foreign government.

The only fundamentals improving are commodities

Jim Rogers makes an real life appearance on CNBC and talks to the masses of finance news junkies in the United States.

CNBC's website is bombarding readers with articles about this Jimmy Rogers interview. If you follow this site, or if you happen to keep your eyes and ears open for Jimmy Rogers in your daily information news sessions, you know he really is not saying anything he hasn't said before.

Basic conclusion – when the reality of printing so much cash catches up with the major economies of the world, people are going to realize their stock gains are in worthless, debased currencies. When this happens, hard assets and the companies producing them will flourish. Demand for copper and steel are not going to disappear, but is just may greatly diminish for U.S. Bonds and Dollar assets if hyper inflation hits.

Get the picture?

Jim Rogers: Profit from commodities, currencies and bonds in times of crisis

Can't seem to find part 2. Rogers covers his general view of where markets currently are and where he's putting his money right now.

Newswire: Commodities with a added bit of South-South Energy Cooperation

[Uranium] -- India Bids for Stakes in Russian, Kazakh Uranium Mines to Fuel Reactors
Nuclear Power Corp. of India is bidding for stakes in uranium mines in Russia and Kazakhstan, and offered to build reactors in central Asia, Chief Executive Officer S.K. Jain said.

“We’re trying to achieve stakes in mines,” Jain said today in an interview at a Moscow nuclear forum organized by Rosatom Corp., the country’s nuclear holding company. The company is discussing buying into sites including the untapped Elkon deposit in Russia’s Far East, he added.

India, which suffers peak power shortages of as much as 17 percent, needs uranium to fuel 28 planned reactors and meet a target of adding 40,000 megawatts of nuclear generation by 2020. The second most-populous nation will seek an annual 1,500 metric tons of uranium for 60 years to fuel new reactors, Jain said.

“We’re exploring the possibility of a long-term partnership and not only for uranium supplies,” he said. India proposed building 220- to 500-megawatt reactors in Kazakhstan, which doesn’t yet have any nuclear power plants, he added.


[Crude Oil] -- Crude Oil Advances as U.S. Consumer Confidence Increases, Equities Climb
Crude oil rose to a six-month high after a report showed that U.S. consumer confidence jumped to the highest level since September, signaling demand may rebound.


[Copper] -- Copper Climbs in N.Y. as U.S. Consumer Sentiment Jumps Most in Six Years
Copper prices rose in New York and London after a report showed U.S. consumer sentiment jumped this month to the most positive since September.



[Gold] -- Gold May Climb to Record $1,250, Standard Bank Says: Technical Analysis
Gold may target a record $1,250 an ounce as a continuation head-and-shoulders pattern may be forming within a longer-term trend, Standard Bank Group Ltd. said, citing trading patterns.


[Platinum, Palladium] -- Platinum, Palladium Fall in New York on Weak Auto-Industry Demand Outlook
Platinum fell the most in two weeks in New York on concern that auto-industry demand for the metal will take longer to recover than other parts of the economy. Palladium futures also declined.


[Corn] -- Corn Falls as Dry Spell Allows U.S. Farmers to Accelerate Delayed Planting
Corn fell, erasing an earlier gain, on speculation that Midwest farmers accelerated plantings delayed by rain, improving prospects for output in the U.S., the world’s largest exporter.

Newswire: South-South Cooperation

[China - Venezuela] -- CNPC, Venezuela Plan to Build Two Oil Refineries in China
China National Petroleum Corp. and Venezuela plan to build two oil refineries in China, Jiang Jiemin, the president of the Chinese company, told reporters in Beijing today.


[China - Trinadad & Tobago] -- Alutrint: Chinese labor needed due to lack of local expertise
China's EXIM bank placed as a condition on its consent to provide a US$400mn loan to the Trinidad & Tobago government to build the Alutrint aluminum smelter - in the La Brea region of Trinidad island - that the project hire Chinese contractor CMEC to provide labor and technology for the plant, Alutrint manager of communications and community relations Josieann Richards told BNamericas.


[China - Russia] -- Chinese Envoy to Russia: Oil Pipeline Serves Strategic Goals of Both Sides
The construction of the China-Russia oil pipeline conforms with the strategic goals of China and Russia to diversify the former's energy imports and latter's energy exports, Chinese Ambassador to Russia Liu Guchang has said.


[South Korea - Peru] -- Peru hopes to complete 70% of FTA talks with Korea this week
Peru hopes to complete 70 percent of free trade negotiations with South Korea this week because of the similarities found between the two negotiating teams, allowing them to progress quickly, Peruvian chief negotiator Nathan Nadramija said Monday.

During the first round of FTA Negotiations in Seoul on March 16, both countries successfully concluded four chapters relating to electronic commerce, border services, as well as two other chapters related to institutional issues.


[India - Argentina - Bolivia] -- Jindal Begins Producing Gas in Bolivia for Export to Argentina
India’s Jindal Steel & Power has started producing natural gas in Bolivia that will be exported to Argentina, a company executive told Efe on Monday.

Luis Carlos Kinn, manager of Jindal subsidiary Gas to Liquids Internacional S.A., confirmed the successful completion of the first production test at the well drilled in the El Palmar field, some 50 kilometers (31 miles) from Santa Cruz, the capital of the likenamed eastern province.


[Chile - Bolivia] -- Chile Open to Tunnel Proposal Giving Bolivia Access to Sea
The Chilean government is willing to study the proposal by a group of architects that would provide landlocked Bolivia with access to the sea through a tunnel to an artificial island in the Pacific Ocean.


[Venezuela - Angola] -- Venezuelan Government Bank BANDES To Open Branch in Angola
Jesus Alberto Garcia, Venezuelan ambassador to Angola, stated in an interview with Radio Nacional de Angola that Banco de Desarrollo Económico y Social de Venezuela (BANDES), the state development bank of Venezuela, will open a branch in Angola. He added, “This is one of the main things President Chavez wants to do with Africa.” Branches of BANDES outside of Latin America and the Caribbean include Syria and the Republic of Mali.


[Latin America - Spain] -- Spain Wants Closer Ties with Latin America
Spain’s King Juan Carlos and Prime Minister Jose Luis Rodriguez Zapatero said Monday that the upcoming bicentennials of Latin American independence should be used to promote Spanish and European Union ties to the region.

Newswire: Commodities

[Crude Oil] -- Oil Falls in New York on Speculation Increased Supplies Will Limit Gains
Crude oil fell on speculation that last week’s 10 percent advance will be undone as U.S. inventories climb and fuel consumption declines.

Oil followed equity markets lower today, reversing gains made last week after the U.S. economy lost fewer jobs than expected. Crude inventories rose to the highest since 1990 in the week ended May 1 as fuel consumption tumbled, an Energy Department report showed last week.


[Natural Gas] -- Natural Gas Declines on Speculation 22% Advance Was Excessive
Futures fell for the first time in four days on speculation last week’s 22 percent rally was unjustified.


[Copper] -- Copper Futures Decline for Third Straight Session as China's Demand Eases
Copper prices fell for the third straight session in New York on signs that demand may ease in China, the world’s biggest user of industrial metals.


[Precious Metals] -- Gold, Silver Fall in N.Y. as Investment Demand Slips on Signs of Recovery
Gold and silver prices dropped in New York on speculation that investment demand will decline as more signs emerge that the global recession may have touched bottom.

Newswire: Commodities

[Energy] -- Crude Oil Falls on Speculation U.S. Supplies Climbed Last Week

May 5 (Bloomberg) -- Crude oil fell from a five-month high on speculation a government report will show that U.S. supplies climbed to the highest level in more than 18 years.

The Energy Department tomorrow will probably say that crude-oil inventories increased 2.5 million barrels last week, according to a Bloomberg News survey. Prices surged yesterday as the Standard & Poor’s 500 Index gained 3.4 percent and pending sales of existing U.S. homes jumped.



[Base Metals] -- Copper Tumbles From Two-Week High on Renewed Growth Concerns

May 5 (Bloomberg) -- Copper fell from the highest price in two weeks on concern that government stress tests may show some of the largest U.S. banks need more capital and that financial losses will continue to curb growth.

The tests may show that about 10 banks need additional capital to weather a deeper recession, people familiar with the matter said. The Federal Reserve is expected to deliver the results of the tests to executives today. Copper surged 12 percent in the previous four sessions on speculation that the global contraction may be bottoming.



[Precious Metals] -- Gold Climbs to One-Week High as Dollar Declines; Platinum Gains

May 5 (Bloomberg) -- Gold rose to a one-week high in New York and London as the dollar declined against the currencies of major trading partners. Platinum and silver also climbed.

Gold jumped 1.8 percent yesterday as the dollar fell to a four-week low against the euro. Some investors have bought gold betting on “negative data” about U.S. banks in a report from the Federal Reserve scheduled in two days, said Manqoba Madinane at Standard Bank Group Ltd. in Johannesburg. The dollar index has slid 0.9 percent this week.



[Agriculture] -- Wheat Gains as Wet, Cold Weather Delays U.S. Planting Progress


May 5 (Bloomberg) -- Wheat prices rose as wet, cold weather delayed planting and the emergence of crops in the U.S., the biggest exporter of the grain.

About 23 percent of the spring wheat was planted as of May 3, down from 55 percent at the same time last year and an average of 59 percent from 2004 to 2008, the Department of Agriculture said yesterday in a report. Planting was 3 percent completed in North Dakota, the crop’s biggest producer, down from 54 percent at this time last year, USDA data show.

Commodity markets retreat on swine flu fears

Commodity prices retreated around the globe as fears grew about the highly contagious swine flue .

Crude oil prices fell. ICE June Brent was down $1.15 to $49.17 a barrel while Nymex June West Texas Intermediate dropped $1.30 to $48.84 a barrel.


“There is a risk that the flu scare will hit international aviation travel, which would have a negative impact on demand for jet fuel,” said Eugen Weinberg at Commerzbank.

He added: “Current low oil prices will cause Opec to maintain current production constraints or take steps to cut back output even further, which supports our view that crude oil will trade at US$70 a barrel by the end of the year."

Soy rose $.03 cents to $10.07 a bushel, steadying only after dropped $.35 cents in yesterdays session.

Copper fell 2.4% to $4,205.50 despite a fall in 5,000 tonnes of stockpiles according to the London Metal Exchange (LME).

Tin lost 3.6%, falling to $11,860 a tonne.

Nickel fell 2.6% to $10,860 a tonne.

Gold dropped below its 900 level to a spot price of $898 a troy ounce.

James Steel of HSBC said the gold market had failed to react positively to news of the swine flu outbreak for two important reasons.

“First, investors flocked mainly into the dollar and other safe haven currencies, rather than into gold. The subsequent rally in the dollar weighed on gold prices.

Venezuela's to do list: Sell China 1 million barrels oil/ day by next year

Chavez's tour de Asia produced a new bit of news on Friday:

"I proposed that given the global situation we study the possibility and we agreed to move up the target set in the strategic accord for 2013," said Chavez on Friday.

Basically this means that in the context of the current global economic crisis Venezuela needs to increase its oil revenues which account for about 90% of the country's budget. Second, China which only a year ago was paying astronomical prices for all its commodity inputs (including oil), is now on a shopping spree in order to secure future supply while the price is good.

Click here to access a concise article which covers the major points on this development from Rigzone -- Efe

IEA downgrades 2009 global oil demand... again

In its Monthly Oil Report, issued Friday in Paris, the IEA said that "after a flurry of downward adjustments by both public and private forecasters," oil demand for 2009 has been revised down by 1 million barrels per day, to 83.4 million barrels per day.

This is a drop of 2.8 per cent compared to 2008, the IEA said.

Global GDP is now expected to contract by 1.4 per cent in 2009, with the 30 members of the Organization for Economic Cooperation and Development (OECD) especially hard-hit.

Click here to access this article in its entirety from Rigzone -- Deutsche Presse-Agentur (dpa).

Newswire: Commodities

Mid-week review of the commodity markets from Bloomberg's Commodity Section.

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Crude oil - $49.38 / barrel

Oil Rises as Government Shows Smaller U.S. Supply Gain Than API - Bloomberg Article

April 8 (Bloomberg) -- Crude oil rose for the first time in four days after a U.S. government report showed a smaller inventory gain than an industry report.

Supplies increased 1.65 million barrels to 361.1 million last week, the highest since July 1993, the Energy Department said today. Stockpiles were forecast to climb by 1.5 million barrels, according to a Bloomberg News survey. The industry- funded American Petroleum Institute yesterday said stockpiles jumped 6.94 million barrels to the highest since 1990.

~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~

Gold - $885.90 / ounce
Silver - $12.34 / ounce

Gold Rises on Investor Demand for Store of Value; Silver Climbs - Bloomberg Article

April 8 (Bloomberg) -- Gold rose for a second straight day in New York as some investors purchased the metal to hedge against financial turmoil. Silver also gained.

The U.S. Treasury Department extended last year’s taxpayer- funded bank bailout to life insurers. Earlier, the bailout was broadened to include automakers and credit-card companies. Researcher GFMS Ltd. said yesterday that gold may reach a record this year as government spending raises inflation concerns.

“The reasons why investors bought gold -- fears of longer- term inflation and currency debasement -- remain intact,” John Reade, the head UBS AG metals strategist in London, said today in a report. Once gold prices have stabilized, “we expect bottom-fishers to begin the next cycle of investment,” he said.

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Copper - $4,400 / ton
Zinc - $1,365 / ton
Aluminum - $1,490 / ton
Lead - $1,335 / ton
Nickel - $10,925 / ton
Tin - $10,880 / ton

Copper Gains, Erasing Earlier Drop, in London as Shares Advance - Bloomberg Article

April 8 (Bloomberg) -- Copper advanced on the London Metal Exchange, erasing earlier declines, as shares rose on prospects government support will help automakers and banks.

The Dow Jones Stoxx 600 Index of European shares rebounded after dropping as much as 1.7 percent today, while the U.S. Dow Jones Industrial Average climbed. The Dollar Index, a measure of the currency against six counterparts, fell 0.2 percent. A weaker greenback cuts the cost of commodities priced in the dollar for holders of other currencies.

“A little bit of buying has crept through on the back of the Dow,” said James Roberts, a broker at Sucden Financial Ltd. in London. “The turnaround in prices is equity-driven.”



Mid-week review of the commodity markets from Bloomberg's Commodity Section.

Deutsche Bank sees hope in the commodity markets

The global head of Deutsche Bank's commodity unit, David Silbert, announced today the bank (Germany's largest bank by market share) will be expanding its commodity team by roughly 10% this year.

DB will be adding new assets of coal, European natural gas and shipping to its balance sheets.

DB has seen its revenue from commodities quadruple over past two years. The bank seems confident this trend can continue and that as global stimulus packages hit the market and the general global economic outlook improves, commodity demand will once again head north.

“With hope of an economic rebound, crude, base metals prices are going to be higher than now,” said Silbert.

Bloomberg does a pretty good job in this article of contrasting DB's strategy vs tha to Zurich-based UBS AG.

Jim Rogers comments on China - Tuesday, March 24

Brazil Petrobras Reports Reconcavo Oil Find to ANP

Brazilian state-run energy giant Petrobras notified regulators late Monday that it found traces of oil in a test well drilled in the Reconcavo Basin.

Dow Jones Newswire

Energy Markets

Investments:

ExxonMobil Opens Wallet for Major Long-Term Investments - Exxon Mobile Corp.

Exxon Mobil Corporation has announced plans to invest at record levels -- between $25 billion and $30 billion annually over the next five years -- to meet expected long-term growth in world energy demand.

Galp See Brazil's Tupi Profitable at Current Oil Prices Map - Dow Jones Newswires

Portugal's Galp Energia believes production at the Tupi subsalt oil field in Brazil is viable despite the slide in international oil prices, Galp's chief executive said Wednesday.

"Production at Tupi is competitive, even at the actual level of oil prices," Galp CEO Manuel Ferreira de Oliveira was quoted by the Estado news agency as saying after his company released its fourth-quarter earnings.

PetroChina to Speed Up Pipeline Construction in 2009 – Xinhua News Agency

Chinas' top oil company PetroChina will accelerate building pipelines in 2009, according to China Securities Journal.


Shrinking output / exports:

Venezuela to Cut Oil Contracts As Prices Fall – Dow Jones Newswires

Venezuela said it will seek to renegotiate contracts with oil-service companies, with PDVSA planning to cut its spending on oil-service contractors by 40%.

Pemex gas output to fall for the first time since 2002 - BNAmericas

Mexican state oil company Pemex is forecasting that its natural gas production in 2009 will fall for the first time since 2002.

Output is expected to slip on lower associated gas production at the prolific Cantarell field, which is in its stage of natural decline, Pemex spokesperson Carlos Ramírez said, citing PEP authorities.

PetroChina Cuts '09 Output Targets on Falling Demand – AFX News Limited

Top Asian oil and gas producer PetroChina has cut its domestic production targets for 2009 by 10 to 20 percent at many oil fields because of falling demand, a company executive said on Wednesday.

Iraq's Oil Exports Fall in February – Xinhua News Agency

Iraq's crude oil exports slipped slightly to 1.804 million barrels a day in February, down from 1. 893 million barrels a day in January, an Iraqi Oil Ministry source said on Tuesday.

BP Scales Back Production Growth Plans – AFX News Limited

Oil major BP Plc dropped a key oil and gas production growth target on Tuesday, dashing investor hopes that Chief Executive Tony Hayward would chart a return to output growth after years of stagnation.


Drama in Ecuador:

Ecuador will not confiscate Perenco's Oil Fields Over Tax Debt Burden - Rigzone

Ecuadorean Oil Minister Derlis Palacios said Wednesday that the country will not seize the oil fields of French company Perenco over debts, reports Reuters. This statement comes a day after Ecuador said that it would freeze Perenco's oil income to collect the debt.

Ecuador Attaches Output of French Oil Company – EFE News Services

The Ecuadorian government on Wednesday announced its decision to retain 70 percent of Perenco's output as part of its bid to collect $338 million in windfall-profits tax owed by the French oil company.

China-Brazil: Oil for Cash

Brazil and the People's Republic of China signed deal last Thursday that will ensure China a long-term supply of oil in exchange for much-needed financing for Brazil's state oil conglomerate Petrobras.

Petrobras, will supply China with a total of about 100,000-160,000 barrels of oil a day. In return, China will supply $10 billion in loans to help Petrobras and its private-sector partners develop the pre-salt” fields" discovered last year, which Brazil estimates it will need $174.4 billion of investments between 2009-2013 to develop.

The agreement breaks down as follows. 60,000 and 100,000 barrels a day will go to Unipec Asia, a subsidiary of China Petroleum and Chemical Corporation (Sinopec). 40,000 and 60,000 barrels a day will go to PetroChina.

The loan is guaranteed in the form of a memorandum of understanding with the China Development Bank and Sinopec to provide up to $10bn in finance to Petrobras.

The agreement also covers potential joint development of oil industry projects and supply of goods and services to Petrobras by Chinese companies.

To read more about this topic check out this FT article

If you're interested here's how these companies have been doing in their respective stock markets over the past year.

PETROBRAS - Sao Paolo: (PETR3.SA)

SINOPEC CORP - Hong Kong: (HKSE: 0386.HK)

PETROCHINA - Hong Kong: (HKSE: 0857.HK)

Enap, Chile's state oil company declares $958 mil net loss in 2008

Chile's state oil company, Enap, the second largest company in the country after copper giant Codelco (according to this FT article) declared a $958 million net loss in 2008 yesterday.

Enap produces 230,000 barrels of oil per day and 13m cubic meters of fuel a year. The company also has interests in Argentina, Ecuador, Egypt and Iran and . It supplies about 85 per cent of Chile’s fuel needs and exports to Central and South America.

Sadly, Enap is what will go down in history as a classic victim from the volatile markets of the world economy during the global economic crisis of 2008-2009.

Record high commodity prices reached in 2007-2008 forced Enap to purchase a great deal of the crude it refined for use in the domestic economy for around $140 a barrel. When oil prices dropped to $34 a barrel in December, the company was forced sell its refined crude products for the lower market price. In all, this macro swing in the global economy cost the company around $650 million.

Two other factors also contributed to the loss. Drought in northern Chile forced Enap to shut down some hydroelectric plants. Second internal problems in Argentina lead the government to implement subsidies on petrol products, igniting demand in Argentina. When push came to shove and Argentina realized there wasn't enough gas to go around, the country diverted some of its supplies meant for Chile to the domestic economy. Thus forcing Chile in both instances to import energy from new and more expensive sources.

All in all a bad year for Enap in the global economy.

According to this FT article, Enap has pinned its hopes on hydrocarbons exploration in the Magallanes region in the far south of Chile, but the state auditor has raised questions about the viability of the project, and Enap has yet to announce whether it will go ahead.

Trouble for Mexico's oil sector

Petroleos Mexicanos (PEMEX), Mexico's state oil conglomerate said on Friday, crude oil output fell 9.2% in January.

Cantarell, one of Pemex's largest oil fields and the third largest in the world, saw output plunge at its fastest rate in over 14 years. Pemex says the field is currently producing around 772,000 barrels a day, down a whopping 38% from a year earlier.

Pemex's overall production fell to 2.885 million barrels a day, down from 2.957 million barrels a year earlier.

“If the question is, what is Pemex going to do in the short-term to prevent the falling production?” George Baker, a Houston-based energy consultant who publishes the newsletter Mexico Energy Intelligence, said in an interview. “I’m afraid the answer is nothing.”

On a positive note, Pemex's natural-gas output rose 8.5% to 7.091 billion cubit feet in January. Too bad natural-gas fell below $4 per million British thermal units for the first time in more than six years (see this Bloomberg article for more)

All in all, Pemex and more importantly the country of Mexico need to re-align their economy away from the oil sector. This has proven rather difficult in the past, as it has as well in other Latin American country's which rely too heavily on a particular basket of commodity exports.

The current global recession is once again evidence of how dangerous a commodity focused growth strategy in reality is.

For Mexico, the situation is even more dire. Crude oil and natural gas, as you can see below (and have probably heard) are not selling for what they used to.

Close proximity to the US, heavy reliance on money from relatives working in the US, a declining oil industry and the general erosion of their competitive edge in manufactured goods because of the rise of Asia put Mexico in a particularly difficult situation.

I in no way consider myself a expert on Mexico. As a matter a fact, I have purposely left Mexico out of much of my academic writing due to the unique Macro-Economic conditions facing the country. Check out this site for a great read on Mexico (http://mexfiles.net/).

Commodities in a Global Recession, Outlook for Grains - Bloomberg

Philip Gotthelf of Equidex -- A new brain in the commodity world I have started to pay attention to.

Analysis and Discussion with President Philip Gotthelf of Equidex (Market Pulse)

China National Offshore Oil Corp. to invest $6.76 billion

The China National Offshore Oil Corp., announced yesterday that it plans to invest $6.76 billion US dollars in developing oil fields and in exploring / securing rights to new sources of crude oil and natural gas.

Investment figures are up about 18.9% according to the article published by Asia Pulse Pte Ltd yesterday, and accessible through this link to Rigzone.

"Seeking long-term increase in Chinese demand, the state-owned entity will continue with investment aimed at boosting its production capacity at a time when OPEC has reduced its own output.

The pie is being divided as follows. Oil field development will be getting $4.38 billion of the total investment and exploration for new oil and gas fields will receive about $1.1 billion.

So how to you decipher the meaning behind all this sudden spending? For starters, exploring for commodities when prices are as low as they are is quite risky. The reward can be potentially huge if legitimate and cost-effective discoveries are made, but new resources still take years to develop until they are extractable.

China is therefore being smart about things. Allocating the majority of the investment towards developing fields that will start to produce oil so that when demand does pick up it won't be left scrambling for crude. Furthermore, if demand does not pick up and the global economy continues to slow, China will not have wasted too much of the investment in finding new resources that there is no demand for.