On 22 March 2017, Sinopec agreed a deal to buy out Chevron’s downstream businesses in South Africa and Botswana, in China’s first major investment into the downstream oil industry in Africa. Although China already has an extensive footprint in Africa, the majority of these operations have been confined to the upstream sector – in oil and gas exploration (IDE-JETRO, ND).

China has been steadily expanding its upstream operations outside China since the late 1990’s, through its three main state-controlled oil companies: CNPC, Sinopec and CNOOC (Raj Verma, 19.12.2016), in an attempt to meet the country’s growing oil demand.

Over the past several decades, China’s oil demand has risen drastically, driven by continued economic growth, an expanding middle class and a growing demand for consumer goods. China is now currently the world's second-largest oil consumer, but due to a steady drop in domestic production – due to high production costs, a deterioration in mature oilfields, and cheaper international oil prices – it has also become the world’s biggest importer of crude oil.

In 2016, China’s dependency on foreign oil imports reached 64.4% of total demand – an increase of 3.8% from 2015 – this is expected to increase further through 2017 (Ecns, 13.01.2017).

However, despite this increase, domestic demand has actually begun to slow down significantly. In 2016, demand for oil in China grew at its slowest pace since 2013, increasing by just 2.5% – down from 3.1% in 2015 and 3.8% in 2014. Notably, the slowdown occurred as the Chinese economy expanded at its slowest pace in 26 years (Reuters, 07.02.2017).

Therefore, although foreign investments by Chinese oil companies have largely remained within the upstream sector, the significant slowdown in domestic demand has meant that Chinese companies are turning to foreign markets to secure further customers for continued growth.

Notably, Africa appears to be one of China’s top destinations for investment.