|


Until recently, China's view of the global energy map focused narrowly on the
Middle East, which holds roughly two-thirds of the world's oil. Special
attention was directed toward one well-supplied country: Iraq.
Through cultivation of Saddam Hussein's government, China sought to develop some
of Iraq's more promising reserves. Beijing advocated lifting the United Nations
sanctions that prevented investment in Iraq's oil patch and limited sales of
its production.
Then the United States went to war in Iraq in 2003, wiping out China's stakes.
The war and its aftermath have reshaped China's basic conception of the
geopolitics of oil and added urgency to its mission to lessen dependence on
Middle East supplies. It has reinforced China's fears that it is locked in a
zero-sum contest for energy with the world's lone superpower, prompting Beijing
to intensify its search for new sources, say international relations and energy
experts say.
As a vocal camp in Congress recoils at the prospect of the mainland's
state-owned CNOOC taking control of California-based Unocal, the Bush
administration's decision to wage the war in Iraq stands out as a crucial
factor in explaining how Beijing came to scour the Earth for energy and why the
effort is likely to remain central to Sino-US relations for some time, say the
analysts.
``Iraq changed the government's thinking,'' said Pan Rui, an international
relations expert at Fudan University in Shanghai. ``The Middle East is China's
largest source of oil. America is now pursuing a grand strategy, the pursuit of
American hegemony in the Middle East. Saudi Arabia is the number one oil
producer, and Iraq is number two [in terms of reserves]. Now, the United States
has direct influence in both countries.''
Many other factors help explain China's motives in despatching its energy
companies abroad for new stocks. Oil demand is exploding in China as people
embrace automobiles and as factories, apartment towers and office buildings
proliferate. For the third summer in a row, China is rationing energy, limiting
production in industrial areas.
In little more than a decade, China has changed from a net exporter of oil into
the world's second-largest importer, trailing only the United States.
Concern is mounting about prospects for China's domestic oil production, which
supplies about two-thirds of the country's crude oil needs. Beijing estimates
that the country will need 600 million tonnes of crude oil a year by 2020, more
than triple its expected output. Worldwide, the best oil fields are already
claimed.
For the United States, Europe and Japan, the oil shocks of the 1970s supplied
the lessons that have shaped their thinking about energy. China is a latecomer
to the vagaries of the global energy business. It is grappling with how to
manage dramatic growth and soaring demand for energy at the same time it
confronts the implications of interventionist US foreign policy.
``Many people argue that oil interests are the driving force behind the Iraq
war,'' said Beijing University security expert Zhu Feng. ``For China, it has
been a reminder and a warning about how geopolitical changes can affect its own
energy interests. So China has decided to focus much more intently to address
its security.''
Throughout China's modern history, and particularly under Communist Party rule,
the country's leaders have sought self-sufficiency - a drive fueled by
nationalist pride and the experience of colonialism, which fed notions that the
outside world wants to prevent China's rise as a great power.
Under the rule of Mao Zedong, China, under the banner of fending for itself,
focused on oil production in its northeast, near the city of Daqing. The
government's current push to secure foreign oil fields is driven by worries
that there may one day be too little oil to meet worldwide demand and that
foreign powers, in particular the United States, will choke China.
``If the world oil stocks were exceeded by growth, who would provide energy to
China?'' said Shen Dingli, an international relations expert at Fudan
University who advises the government on security policy. ``America would
protect its own energy supply. The US is China's major competitor.''
Such fears involve Taiwan. The United States has pledged to help Taiwan should
the mainland attack. Beijing envisions being cut off from energy supplies by
the US Navy in the event of war.
Many energy experts say owning oil fields provides no real energy security. It
does not cushion against a rising cost of energy because no one country is
large enough to determine the market price. Neither does it ensure access,
because getting oil where it is needed depends largely upon shipping lanes
policed by the US Navy.
``There's an illusion that ownership ensures either volume or price,'' said
William Overholt, director of the Rand Center for Asia-Pacific Policy. ``Oil is
an internationally traded commodity. The key is having secure lines of supply
from the Middle East.''
Even the chairman of CNOOC asserted that buying foreign oil fields would give
China additional security, dismissing the notion that anything other than
commercial interest motivates his firm's US$18.5 billion (HK$144.3 billion) bid
for Unocal.
``In today's world, as long as you have money, you can buy oil from anywhere,''
said Fu Chengyu.
He maintained that CNOOC's interest in Unocal is purely commercial. The mainland
company is eager to have Unocal's substantial oil and gas reserves in Southeast
Asia to help feed the liquid natural gas terminals it is developing in coastal
China.
For China's leaders, however, buying foreign oil and gas fields in the name of
energy security has become a central mission. Throughout the 1990s, China made
deals to lock in long-term supplies and buy installations from Africa to Latin
America. In 2002, CNOOC became the largest offshore oil producer in Indonesia
when it bought a field from the Spanish firm Repsol.
The Iraq war substantially intensified the foreign push. Most immediately, it
destroyed China's hopes of developing large assets in Iraq. China had been
waiting for the end of sanctions to begin work on the Al-Ahdab field in central
Iraq, under a US$1.3 billion contract signed in 1997 by its largest state-owned
firm, China National Petroleum Corp. The field's production potential has been
estimated at 90,000 barrels a day. China was also pursuing rights to a far
bigger prize - the Halfayah field, which could produce 300,000 barrels a day.
Those two fields might have delivered quantities equivalent to 13 percent of
China's current domestic production.
But the larger impact of the war is on China's understanding of the rules of the
global energy game.
``The turning point in China's energy strategy was the Iraq war,'' said Tong
Lixia, an energy expert at the Chinese Academy of International Trade and
Economic Cooperation, which is affiliated with the Commerce Ministry. ``After
2003, both the companies and the government realized China could not rely on
one or two oil production areas. It's too risky.''
This year, China began work on a strategic oil reserve in coastal Zhejiang
province that will allow the country to operate without imports for up to three
months. But the biggest emphasis has been on securing new stocks abroad,
particularly inneighboring countries such as Kazakhstan and Russia, to limit
dependence on shipping lanes.
CNPC has been leading the way abroad. Since 2003, it has signed 20 contracts to
explore or purchase production facilities in 12 countries such as Peru,
Tunisia, Azerbaijan and Mauritania. Its production of natural gas at overseas
facilities nearly doubled last year from 2003. Its overseas oil production
climbed by a fifth.
Late last year, President Hu Jintao said mainland firms would invest US$5
billion in oil projects in Argentina.
So far, however, China's foreign campaign has delivered more lessons in the
difficulties of the energy business than energy itself. In June 2003, Beijing
hailed a US$150 billion agreement with Russia to tap fields in Siberia and send
the oil through a new pipeline to China. The project was to supply up to
one-third of imports by 2030. But that deal appeared to disintegrate when the
Russian signatory, Yukos Oil, fell into disarray last year after its chief
founder was jailed on tax-evasion charges. Japan appears poised to capture the
Siberian oil with a promise of at least US$6 billion to develop the fields,
though recent indications are that Beijing is putting together an even more
generous package to bring the project back, according to an adviser to the
government.
With so much competition for assets, China has pursued deals with international
pariah states that are off-limits to Western oil companies because of
sanctions, security concerns or the threat of bad publicity. CNPC is the
largest shareholder in a consortium running much of the oil patch in Sudan, a
country accused by the US of genocide in its western region of Darfur. Last
year, China signed a US$70 billion oil and gas purchase agreement with Iran,
undercutting efforts by the United States and Europe to isolate Teheran and
force it to give up plans for nuclear weapons. If CNOOC acquires Unocal, it
would have gas fields and a pipeline in Burma, whose operation by the US
company has been criticized by human-rights groups.
``No matter if it's a rogue's oil or a friend's oil, we don't care,'' said an
energy adviser to the central government who spoke on the condition he not be
identified, citing the threat of government disciplinary action. ``Human
rights? We don't care. We care about oil. Whether Iran would have nuclear
weapons or not is not our business. America cares, but Iran is not our
neighbor. Anyone who helps China with energy is a friend.''
THE WASHINGTON POST
|