Saturday, March 11, 2006

Energy Supply Security Policy EU and China in Central Asia VI

China’s energy supply policies for Central Asia

The Chinese authorities have regarded the important bulk of oil and natural gas in the Caspian region as a way to stabilize and diversify its energy supply. This is as important as China is already the world’s second largest consumer of primary energy, the third largest energy producer and since 1990 a net importer of energy, from 1993 onwards a net importer of oil products and since 1996 of crude oil. In 2003 China accounted for 41 percent of the world’s oil demand. Overall the consumption of oil, gas, coal and nuclear power expanded more than 10 percent in 2003.[1] According to the EIA International Energy Outlook 2002, China is expected to more than double it oil consumption in 2020 (by then China shall reach 46 percent of US consumption in aggregate terms) comparing with the figures in 1999, from 4.3 MMbbl per day to 10.5, at an annual average growth of 4.3 percent. In the case of natural gas the growth is even more dramatic, from 0.9 tcf in 1999 to 6.4 tcf in 2020, at an annual average increase of 10.1 percent. Moreover in 2030 China’s share of imported oil demand will raise from 34 percent in 2001 to 82 percent in 2030. These are the effects of the constant high growth of the Chinese economy since the beginning of the economic reforms of Deng Xiaoping 1978. This means that energy supply security is a serious issue for Beijing as the dependence [2] form overseas supply is expanding. To tackle this challenge China is developing several initiatives to maintain energy supplies, deepening bilateral links with key energy producers. China has been acquiring interest in exploration and production abroad. China National Petroleum Corporation has acquired oil concessions in Kazakhstan, Venezuela, Sudan, Iraq, Iran, and Peru, and Azerbaijan. China National Offshore Oil Company also has purchased an upstream equity stake in the Malacca Strait oilfield in Indonesia. Addressing the Middle East, China and the Gulf Co-operation Council (GCC) signed in Beijing the Framework of Economic, Trade, Investment and Technological Co-operation in order to set up a Free Trade Area. The official press unveils that “impending a free trade area (FTA) negotiations between China and the Gulf countries are expected to diversify China's oil imports and help Gulf nations reduce US dominance in the region.”[3] The proactive policy of China in this field can be seen in the Asia Cooperation Dialogue (ACD), a forum with twenty-two countries from South Asia, Southeast Asia and Northeast Asia, created in 2002. In 2004, the ACD forum was held in Qindao in China where the foreign affairs ministers of both exporters and importers set up the “Qindao initiative” on energy security and energy cooperation, pledging to stockpile strategic reserves, a regional energy transportation network[4]. In Central Asia, besides the regional framework of the SCO to guarantee security, cross border stability and to combat terrorism, fundamentalism, separatism and other cross border crimes, China has its own bilateral links with Central Asian and Caspian nations in order to diversify its oil and gas supply. Kazakhstan is the most important partner of China in this issue. Thus Beijing launched a bridge for a deeper cooperation in 2004, through the signature of a join declaration in which the Chinese President, Hu Jintao, and the President of Kazakhstan, Nursultan Abishevich Nazarbayev, agreed on the strengthening of economic, commercial and political links. In the joint declaration, besides pledges for mutual investment, bilateral exchanges on educational programmes, culture, sports or technological cooperation, the key words are about energy supply security policies and cooperation. Hence, Kazakhstan promises to support Chinese enterprises to take part in the oil and natural gas exploration in the Caspian Sea region, following the agreement signed in 1997 to build a 3000 kilometers long oil and natural gas pipeline from the Caspian Sea to inland China through the Northwest province of Xinjiang Uygur Autonomous Region – from the Caspian Sea Continental shelf, via Atasu (Kazakhstan) to Alataw Pas in Xinjiang. This mammoth project is expected to cost between 2.5 billion and 3 billion US dollars and the purpose is to transmit at least 20 million tons of crude annually.[5] China plans to construct in the mainland two important oil pipelines: from Shanshan in Xijiang to Lanzhou in Gansu Province and from Urumri in Xinjiang to Lanzhou, to transport oil from the rich oil fields of the west – 30 percent of China’s total oil reserves – to the costal areas, where the industrial development and the consumption is higher.

[1]“World Reserves of Oil, Gas in Good Shape” China Daily July 1, 2004
[2] Half of China's imported oil comes from the Middle East, with Saudi Arabia alone accounting for 17 percent in 2003.
[3] “FTA to help diversify China's energy sources”, Xinhua News Agency, 15-07-2004:
[4] “ACD pledges to ensure energy security”, Xinhua News Agency, 22-06-2004.
[5] “Ancient Silk Road becomes oil route” Xinhua News Agency, 19-05-2004

Europe and China in Central Asia:Energy Supply Security
Energy Supply Security Policy: the New Challenges
The Geopolitics of Central Asia
Oil and Natural Gas in Central Asia
China's Diplomacy towards Central Asia
Excertos adaptados de um ensaio escrito no âmbito doMaster in European Studies do Instituto de Estudos Europeus de Macau.2004.

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