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China Barrels Ahead in Oil Market

The country's hunt for the energy it needs to fuel its economy has led to deals in political hotspots, riling the U.S.

November 14, 2004|Don Lee | Times Staff Writer

Sudan is another example. Among China's African energy partners, which together provide about 20% of the country's oil and natural gas, the single largest is Sudan. Since the late '90s, Chinese oil companies have poured hundreds of millions of dollars into developing oil fields, a pipeline and a refinery.

No Apologies

Despite long-running criticisms by the United States and international groups about human rights abuses in Sudan, Beijing makes no apologies. When pressed on the issue, Chinese foreign officials have been quoted as saying simply that business is business.

In Africa, China has also signed deals to buy oil from Nigeria, Gabon, Cameroon and Angola. Last year China extended a $2-billion loan to Angola in exchange for 10,000 barrels of crude oil a day.

He Jun, a senior analyst at Beijing-based Anbound Strategic Consulting Co., doesn't think China will let itself become involved too heavily in sensitive African nations such as Sudan.

"China's main purpose is still to develop its economy under a peaceful circumstance," he said. Others note that the U.S. and other big consumers of oil also have bought energy supplies from unsavory governments.

For China, more promising are its efforts closer to home. In September, construction crews began work on a 770-mile pipeline running from the oil-abundant Caspian Sea coast in Kazakhstan to China's western border, connecting with another trunk line all the way to China's east coast. The pipeline's initial capacity would be about 10 million tons of crude a year, said Matthew Cairns of Economy .com in Sydney, Australia.

Earlier, during a visit to Russia by Chinese Premier Wen Jiabao, the two countries reached the agreement about Russia exporting more crude to China. Cairns said it was no coincidence then that Wen promised to give Russia support for its WTO bid.

"It's a very cunning political maneuver," Cairns said.

In Russia, China also has sought a crude oil pipeline from eastern Siberia to Daqing in northeast China, to have ready access to supplies. But Japan appears to have won its bid to have the pipeline routed to the Russian port city of Nakhodka on the Sea of Japan.

Japanese and Chinese companies have clashed more openly over the exploration of natural gas in the East China Sea. Tokyo is worried that China would siphon gas from the Japanese side of the ocean bed, and has insisted that China provide details about the natural gas field.

Some political analysts say the competition for energy will severely test the relations of China and Japan in particular. But energy diplomacy also raises new challenges for the West, as the economic and political center in Asia shifts from the United States and Japan to China.

Heightened geopolitical tensions over China's oil imports comes as little surprise to Jeffrey Logan, China program manager at the Paris-based International Energy Agency.

"It's only natural," he said. "The world is struggling to learn more about China. As China enters the world more and more, it's going to depend on the world's resources more and more."

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