China's
thirst for energy complicating global policy
Knight Ridder
NINGBO, China
Petroleumworld.com 01 18 06
Barely
a dozen years ago, when China's lamps still burned low, the country
didn't need deep-sea oil ports, massive tank farms and a brawny
foreign policy to procure oil in far-flung spots.
Today,
China is an oil-guzzling dragon with a voracious thirst. Supertankers
stretching three football fields in length now wait to enter China's
deep-sea ports.
The
busiest oil terminal is at Ningbo on the East China Sea. Shipping
records show that in November, supertankers arrived there from
Saudi Arabia, Oman, Iran, Yemen, Equatorial Guinea, Angola and
Congo to feed a craving that's helped drive up crude oil prices,
rattle global politics and put China and the United States at
odds in some of the world's most unstable regions.
China's
thirst for oil has emboldened Iran and complicated the refugee
crisis in Sudan. With its economy growing at a 9 percent annual
rate, China is also courting many of America's oil suppliers,
including Canada and Venezuela.
Increasingly,
the United States and China are throwing elbows as global rivals
for energy. The tussle could get more aggressive if the two nations
can't manage to co-exist in the global energy contest.
"We've
got to start those discussions before the race for oil becomes
as hot and dangerous as the nuclear arms race between the U.S.
and the Soviet Union," Sen. Joseph Lieberman, D-Conn., said
in a Nov. 30 speech to the Council on Foreign Relations. "If
we let it go, this could end up in real military conflict, not
just economic conflict."
Compared
to the United States, which consumes 25 percent of the world's
annual oil output, China may seem like small potatoes. It burns
only 6 percent of the world's production. Yet its energy use is
rising steeply.
China
exported more oil than it imported until 1993, when imports began
to surge. This year, it's importing 3.4 million barrels a day,
and some estimates say that within a decade it'll need 7 million
barrels a day. Within two decades, demand could reach 12 million
barrels a day, which would equal U.S. imports today. China's oil
thirst since 2000 has accounted for 40 percent of the global demand
growth for crude oil.
Senior
Chinese officials grow testy at the suggestion that China's rising
needs are roiling oil markets, saying the nation is following
a natural path to prosperity.
"Some
people complain that China is driving up oil prices. They think
the reason lies in China's high consumption of oil," said
Zhang Guobao, the vice-chairman of the National Development and
Reform Commission. But Zhang said that China's per capita energy
consumption is one-sixth of developed countries' and deserves
to rise.
"Chinese
people want to live a prosperous life. So the world should respect
China's right to development," Zhang said.
China
still wastes energy, leaving huge potential savings from efficiency.
To generate $1 million in economic output, China needs eight times
more oil -- or its energy equivalent -- than Japan does. Chinese
officials claim a turnabout in efficiency is under way. Last summer,
China made fuel standards for cars more stringent than those in
the United States are, and a campaign is afoot to ramp up reliance
on renewable energy.
Some
experts suggest long-term projections on China's energy needs
may be premature because the nation is capable of rapid adaptation
and change, and of greater reliance on its vast coal reserves.
Some
68 percent of China's power comes from coal, and the nation is
building electric power plants at a rate never seen before on
Earth, fueling them from unsafe shafts where thousands of miners
are killed each year.
China
built power plants this year generating 68 gigawatts of electricity
and plans 80 more gigawatts of capacity in 2006, equal to the
entire capacity of Britain.
"It
took the U.K. 110 years to build those 80 gigawatts," said
James M. Brock, an expert who advises the Beijing office of Cambridge
Energy Research Associates, a U.S. consultancy.
Nonetheless,
China is seeking oil security differently than other countries
in East Asia. It's sent its three major state-owned oil companies
to scour the globe and invest in foreign oil companies and oil
fields.
China,
a relative newcomer to capitalism, deeply mistrusts the global
oil markets, viewing them as distastefully volatile.
Some
analysts find China's efforts to control oil supplies perplexing.
"Oil
is a tradable commodity. So what's the difference between buying
it in the ground in Ecuador or buying it on the spot market?"
asked David Hurd, a Beijing-based oil and gas analyst for Deutsche
Bank. "There's some security to be had. But in times of crisis,
there's little security unless you control shipping lanes."
China's
strategy has led it to bid heavily -- and even to overpay -- for
some assets.
"It's
adapted a very 19th century approach to energy security, where
you seek an almost mercantilist lock-up of energy sources,"
said John J. Hamre, the president of the Center for Strategic
and International Studies, a Washington public policy organization.
China
has some reason to be nervous. While imported oil makes up only
about 12 percent of China's total energy needs, its energy lifelines
increasingly lead to the volatile Middle East. Some 60 percent
of China's oil imports come from the Gulf region. Supertankers
carrying the oil must pass through the pirate-infested Malacca
Straits off Malaysia, where China's oil is protected by the U.S.
Navy. China is beefing up its own navy, but it still can't protect
faraway sea-lanes.
To
diversify its suppliers, China has gone oil shopping in Central
Asia, West Africa and even in South and North America.
Sometimes,
Chinese oil companies simply bid high, as CNOOC Ltd., one of the
national oil companies, did last summer when it offered $18.5
billion for the California oil company Unocal, a deal that was
derailed by Capitol Hill critics who suggested that it threatened
U.S. national security.
At
other times, Chinese diplomats trail the state oil companies,
sweetening investment bids with offers of few-strings-attached
aid packages, hands-off political support and weapons.
"Everywhere
the Chinese go in the developing world, they go with a lot of
development money," said Gal Luft, a Washington-based analyst
and the executive director of the Institute for the Analysis of
Global Security, a nonprofit organization that focuses on the
relationship between energy needs and the economy and national
security.
China
has offered large amounts of development aid in Africa, where
it gets 28 percent of its imported crude and plays an increasingly
important diplomatic role.
Last
year, China gave Angola, its second-largest oil supplier after
Saudi Arabia, a $2 billion oil-backed loan to help repair its
war-ravaged national infrastructure.
Such
loans come with none of the lectures on human rights, good governance,
religious freedom and fiscal reform that accompany U.S. assistance.
In
fact, China has courted oil-rich nations such as Sudan, Venezuela
and Iran that are on the outs with Washington, even dangling the
possibility of using its United Nations Security Council veto
to protect them against sanctions.
China
last year repeatedly blocked U.N. attempts to punish Sudan for
failing to stop atrocities in its Darfur region. China owns a
40 percent stake in the major oil consortium drilling in Sudan,
and it buys half of Sudan's crude exports.
Eyeing
Nigeria's oil fields, China has offered Lagos some $7 billion
in investments and said it may sell the country fighter jets,
too.
Iran,
which won pledges from China last year for $70 billion worth of
oil and natural gas deals, also enjoys vital support from Beijing.
Iran now appears confident that it can resist pressure from the
European Union and the United States to give up its nuclear program,
certain that China will veto any attempt to impose U.N. sanctions.
To
see more stories from the Knight Ridder Washington Bureau, go
to
http://www.krwashington.com.
Knight
Ridder , Dec 28, 2005
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© 2006 Knight Ridder . All rights reserved
