From Washington Post:
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 U.S. is China’s major competitor.”
Such fears involve Taiwan, the self-governing island claimed by China. The United States has pledged to help Taiwan should China attack. Officials in Beijing envision being cut off from energy supplies by the U.S. 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 U.S. Navy.
“There’s an illusion that ownership ensures either volume or price,” said William H. Overholt, director of the Rand Center for Asia-Pacific Policy in Santa Monica, Calif. “Oil is an internationally traded commodity. The key is having secure lines of supply from the Middle East.”
Even the chairman of Cnooc asserted in an interview that buying foreign oil fields would give China additional security, dismissing the notion that anything other than commercial interest motivates his company’s $18.5 billion bid for Unocal.
“In today’s world, as long as you have money, you can buy oil from anywhere,” Fu Chengyu said.
Fu maintained that Cnooc’s interest in Unocal is purely commercial. The Chinese 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 YPF SA.
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 $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. Together, those two fields might have delivered quantities equivalent to 13 percent of China’s current domestic production.
But the larger impact of the war was 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 China’s 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.”
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Tags: China, USA, oil resources, Iraqi war, energy, energy supplies
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