China looks to Iceland for oil opportunity

China and Iceland could become natural partners in the energy sector though it is too early to make any predictions about the benefits, an analyst said.

A source at China Petroleum & Chemical Corp., known also as Sinopec, told China Daily on condition of anonymity talks were under way with the Icelandic government over oil exploration off the country's northeast coast.

China Daily referenced a report published early this week by Ernst & Young estimating arctic waters may hold 13 percent of the world's undiscovered oil and 30 percent of its undiscovered natural gas. A separate reference to the U.S. Geological Survey said 90 billion barrels may be in the arctic.

China's growing economy translates to a higher demand for energy. The Organization of Petroleum Exporting Countries said in a June report most of the world oil demand would be from China. Iceland, meanwhile, is eager to secure more investments as it struggles to overcome crippling financial difficulties.

Ernst & Young energy analyst Andy Brogan told China Daily the Icelandic government was realistic about the potential given the environmental issues surrounding arctic oil and gas exploration.

"It is still too early to predict how successful the deals can be," he said in an interview published Tuesday.