- With its factories working overtime, and its consumers
on course to buy almost two million cars this year, China is developing
a world-class thirst for oil. And its hunt for steady supplies is reshaping
the global energy market, the environment and world politics.
-
- China -- which this year surpassed Japan as the No. 2
petroleum user after the U.S. -- is increasing its oil purchases even faster
than it is pumping up its brawny economy. Imports for the first 10 months
of 2003 are up 30% from the year-earlier period. The International Energy
Agency expects imports to double to some four million barrels a day by
2010. By 2030, the IEA expects China to be importing about 10 million barrels
a day, roughly what the U.S. brings in now. Domestic oil output, meanwhile,
is flat.
-
- From Houston to London to Moscow, oil companies are looking
to secure market share in China, as China roams the world looking for oil
fields to develop. Some fear that China, which doesn't have large strategic
reserves of fuel, might grow so desperate for oil that it would battle
the U.S. for influence in the Middle East or even trade weapons technology
to terrorist states. Others are more optimistic, and think China will realize
it has a vital interest in keeping the region stable.
-
- "China is having an incredible influence on energy
flows, not just in Asia but on a world-wide basis," Peter Davies,
chief economist at BP PLC, told reporters on a recent trip to Russia, from
where BP hopes to supply China with Siberian gas. "The whole center
of gravity of the world energy market is changing."
-
- So far, the most obvious impact has been on prices. In
recent years, China has drawn fire in the U.S. and Japan for exporting
deflation, as its factories pump out low-price T-shirts, sneakers, radios
and other goods. In the $1 trillion-a-year market for oil, the opposite
is happening. This year and next, China is expected to account for about
a third of the increase in global oil demand. China's purchases are an
important reason OPEC, whose members regulate output to prop up oil prices,
has been able to keep oil at or above $30 a barrel for much of this year.
-
- Chinese demand is also making geopolitical waves in the
U.S. Last month, the U.S.-China Economic and Security Review Commission,
a committee of congressional appointees, debated how China's thirst for
oil would affect U.S. access to energy supplies. Last year, the Pentagon
reviewed a report on what it would mean for U.S. national security if the
Chinese and Saudis grew closer. Saudi Arabia, the world's largest exporter,
is negotiating to build a huge refinery in China with Exxon Mobil Corp.
The desert kingdom's state oil company has even begun sending students
to Chinese universities to get undergraduate degrees and learn the language.
-
- Meanwhile, China's mushrooming fleet of cars is adding
to worries about this smokestack nation's impact on the environment. In
the next decade, the number of cars on Chinese roads is expected to grow
fivefold to 100 million, approaching half of the U.S. total, according
to the Development Research Center, a government think tank. China is set
to tighten its emission standards by 2005, and in 2008 it plans to introduce
standards that could be even tougher than those in the U.S.
-
- "If all our bicycles turn into our cars, that's
a horrible figure," says Zhai Guangming, retired director of oil exploration
at state-run China National Petroleum Corp. "It would scare the world."
-
- Flip Side
-
- The flip side of growing Chinese oil imports is increasing
vulnerability. Used to having leverage over foreign multinationals seeking
access to its market, China finds the shoe on the other foot as it is forced
to compete with Japan and other buyers for oil. Chinese oil companies --
starting decades behind U.S. and European giants -- are struggling with
limited success to acquire stakes in oil ventures overseas.
-
- China is particularly exposed in the Middle East, the
source of half its imports, pointing up a little-noted twist: China's energy
lifeline is increasingly dependent on the U.S. fleets that guard the world's
shipping lanes. Like Washington, Beijing will increasingly need stability
in the Middle East to ensure reliable oil supplies at moderate prices.
In the long run, this confluence of interests might tug Beijing closer
to the U.S. But several analysts warn that China's thirst could lead to
Beijing's emergence as a competitor for influence in the Middle East.
-
- "Saudi Arabia could possibly begin looking to the
Chinese for those economic, security and political needs it now garners
from the U.S.," last year's Pentagon study noted.
-
- Energy security has been gripping Chinese economic planners
for years. Government economists long warned about the danger of importing
growing amounts of oil because of the foreign exchange it sucked out of
the country, and because of the dependence it created on volatile overseas
markets. Importing oil stabbed at the heart of Communist Party notions
of self-sufficiency.
-
- In the past decade, technocrats concluded China couldn't
go it alone. Domestic oil output peaked as demand soared.
-
- China's factories were gobbling up huge amounts of oil.
The fuel is the key feed stock for petrochemicals, which the factories
use to crank out plastics, mobile phones, toys and computer parts.
-
- At the same time, the Asian financial crisis of the late
1990s brought about vast economic changes that led to increased demand
for oil. Like smaller Asian countries, China was overly dependent on exports
for growth and exposed to sudden slowdowns abroad. To stimulate the economy,
Beijing began investing billions in infrastructure, encouraging bank lending
and relaxing curbs on home purchases and auto production to get people
spending. The moves sparked explosive sales in apartments and cars -- growth
that filtered through the rest of the economy and led to quantum leaps
in oil use.
-
- "The only force that could help the economy grow
at 8% is consumption," says Ma Xiaoye, a former economic official
and now director of Academy for World Watch, a think tank in Shanghai.
"We had no choice."
-
- The challenges of fueling that growth are clear outside
the capital in the shadows of Cat Ear Mountain, the site of the Beijing
Yanshan Petrochemical Co. refinery. It was established in 1968 at the height
of the Cultural Revolution, when self-sufficiency was China's watchword.
The refinery became an island of industrial stability, expanding output
even as political chaos enveloped the nation. Movie theaters, shops, schools
and eventually a town sprang up around it. Trucks and later a pipeline
solidified a supply link with the huge Daqing field to the northeast, the
refinery's lone supplier.
-
- Turning to Russia
-
- These days, output from the Daqing fields is declining.
"They are reducing crude-oil production every year," says Chang
Jiang, a senior engineer at Beijing Yanshan. "So we are turning to
Russia."
-
- In July, the refinery, a unit of China Petroleum &
Chemical Corp., or Sinopec, processed its first shipment of oil from Russia,
the world's No. 2 exporter. In May, the Chinese and Russian presidents
endorsed the idea of building a pipeline to supply Siberian crude to Daqing,
which could then be fed to Yanshan. OAO Yukos, Russia's largest oil company,
and CNPC, a Chinese oil giant, signed supply pacts promising to send 400,000
barrels of Russian oil a day via the pipeline, slated to be built by 2005.
In eastern Siberia, Yukos has stepped up its search for new oil reserves,
setting up a camp for surveyors in the tundra.
-
- But Russia may be an unreliable lifeline. Yukos's main
shareholder, Mikhail Khodorkovsky, has been jailed amid a political battle
with the Kremlin, casting doubt on the company's ability to keep pushing
the China pipeline ahead. The Kremlin, meanwhile, has put the China project
on hold while President Vladimir Putin mulls an alternate pipeline to Russia's
Pacific port of Nakhodka, which has the advantage of being able to supply
not only China, but also Japan and other Asian consumers. Japanese Prime
Minister Junichiro Koizumi is lobbying hard for Nakhodka, pledging billions
of dollars to help finance the pipeline. He even brought a judo master
to a St. Petersburg summit in January to amuse Mr. Putin, himself a black
belt in the sport.
-
- The Chinese are scurrying for other deals. They are pressing
for access to reserves in Iran, the second-largest exporter in OPEC after
Saudi Arabia. In Iraq, CNPC is hoping the new government will stick by
a deal inked in 1997 under which the oil company will develop Iraq's Al-Ahdab
oil field. Beijing is pushing forward plans for a multibillion-dollar pipeline
from oil-rich Kazakhstan, even amid doubts about the feasibility of the
project. During a visit to Kazakhstan in June, Chinese President Hu Jintao
signed an agreement to revive a long-delayed pipeline project that would
pump oil across the Chinese border.
-
- China's insecurity is making global oil czars nervous.
Top on their list of worries: China, unlike other major industrial powers,
lacks a large strategic reserve of oil to buffer the country during supply
shocks. That gap alarmed the industrial world's energy watchdog early this
year. As the U.S. and Britain prepared to invade oil-rich Iraq, officials
at the International Energy Agency say they opened a dialogue with Chinese
officials. The aim: to preclude panic buying of petroleum by China, which
might roil an already-jittery world oil market.
-
- Chinese officials are loath to discuss the politically
charged topic of energy security. Oil czar Zhang Guobao -- the 59-year-old
vice-minister of a super-agency whose purview includes autos, high-tech
and energy -- turned down requests for an interview.
-
- But pieces of a strategy are starting to emerge. The
State Energy Administration, which Mr. Zhang also heads, plans to create
a strategic oil reserve, but officials won't say how the agency will finance
and build the stockpile. By 2005, China plans to store 50 to 55 days' worth
of oil imports and 68 to 70 days' worth by 2010, according to Wu Kang,
energy analyst at the East West Center in Hawaii.
-
- In Washington, national-security strategists are sorting
through a welter of possible consequences of Beijing's oil thirst. The
study reviewed by the Pentagon last year, "Sino-Saudi Energy Rapprochement:
Implications for U.S. National Security," concluded that the world
oil market will be able to accommodate China. The study also predicted
that Beijing is coming to share America's interest in ensuring the Middle
East remains a reliable supplier of oil.
-
- "We have common strategic needs," says Amy
Jaffe, senior energy analyst at Rice University's Baker Institute for Public
Policy and one of the authors of the study.
-
- Still, many analysts are wary of a Beijing that could
begin to feel boxed in by its energy needs. The study noted that China
might emerge as a major arms supplier to the Saudis. Other analysts fear
that China might be tempted to trade weapons technology for access to oil
in countries such as Libya and Iran.
-
- More than 60 years ago, another emerging Asian power
felt squeezed on energy: Japan. The U.S. responded to Japanese aggression
in East Asia by imposing a natural-resources embargo on Tokyo, which hit
back by attacking Pearl Harbor. Kent E. Calder of Johns Hopkins University's
School of Advanced International Studies says those events point a way
forward for China and the U.S. as they seek to head off future conflict.
-
- "Obviously, historical parallels are never exact,"
Mr. Calder told the congressional commission last month. "Yet Japan's
belligerence when it was vulnerable suggests that taking positive steps
to support China's energy security can be in America's national interest."
-
- Copyright © 2003 Dow Jones & Company, Inc. All
Rights Reserved
-
- http://quicksitebuilder.cnet.com/supfacts/id352.html
|
