Posted on 08/30/2004 9:13:05 AM PDT by hedgetrimmer
Chinese academics are suggesting that an oil pipeline should be constructed from Burma to China in order to reduce the country's dependence on oil imports shipped through the Strait of Malacca.
"Most of China's oil imports come from the Middle East and Africa. Given the current situation in the Malacca Strait, we feel that we should come up with a suitable alternative," Professor Li Chengyang, a co-author of the proposal noted.
One of the problems is that southeastern Asia is home to the world's most pirate-infested waters, with 79 attacks in the first quarter of this year, according to the International Maritime Bureau. Earlier this year, the US Pacific Command chief Admiral Thomas Fargo proposed the idea of a Regional Maritime Security Initiative aimed at improving cooperation, intelligence-sharing, response mechanisms and the patrolling of waters, particularly around the Malacca Strait. "Nominally, the American initiative will help Southeast Asian countries fight terrorism. But in reality, they want to control the Strait of Malacca. For China to fall under American control is a very risky thing." Professor Li added.
The plan is one of a number of proposals to build oil pipelines to China from other Asian countries, including Thailand, Pakistan and Bangladesh. The proposal put forward by three professors from southwestern Yunnan Province, which borders Burma, suggested that China should build an oil pipeline from Burma's western deep-water port of Sittwe across the country to the city of Kunming, Yunnan's capital.
According to report by 21 Shiji Jingji Baodao (21 Century Business Herald), Chinese Premier Wen Jiabao and the Burma Prime Minister Khin Nyunt discussed the plans for an oil pipeline when they met on July 11 in Beijing. The project will reduce journeys by 1820 sea miles compared with the Malacca route, experts have estimated.
However, a number of obstacles need to be overcome if the proposal is to put into practice. First, trade partnership with Singapore and other Southeastern countries might be affected. At the moment, China is one of Singapore's most important oil trading clients, with a substantial proportion of China's oil imports coming via Singapore. If the Sino-Burma Pipeline Project is put into operation, trade between the two countries will definitely be affected.
Moreover, the huge Sino-Burma project will significantly influence oil pipeline projects in Thailand, Vietnam and India. Some experts have predicted that it is quite possible for these southeastern countries to deliberately block the project in order to protect national interests.
Furthermore, how would oil transported to Kunming through the pipeline be further transported to other regions in China? Getting the oil from southwestern China to its eastern economic centers will be a massive challenge, with Yunnan lacking oil infrastructure at present. To build up more oil refining projects in the province and lay down more pipelines would be quite costly.
Yet whatever difficulties arise, China is determined to protect its national energy security by diversifying where and how the world's second-largest oil consuming country obtains its oil. On July 30, Li Lianzhong, the vice director of the Economic Bureau of China's Central Policy Research Center, had made 10 proposals to protect China's energy safety at the National Energy Development and Investment Forum. The Sino-Burma Pipeline Project was listed among the proposals.
China's hunger for oil, which has been one factor in the rise of world oil prices, is expected to grow by 8.1% or 510,000 barrels a day, according to the International Energy Agency. Limited refining and oil-import capacity, as well as transportation bottlenecks, may hinder the growth of China's economy.
Complete title:
Will Sino-Burma Pipeline Project free China from the Malacca Strait?
The article clearly says "chinese academics" not engineers ;-)
The proposed new shipping canal across southern Thailand is much more likely to happen.
China had a fit a few months ago when Admiral Fargo proposed the regional maritime security initiative. It got Malaysia and Singapore to better cooperate among themselves.
Strategically for us, it would be a useful thing for the US to have a presence in the Strait.
At least the article did not use the tiresome term "Myanmar".
So, according to the libs, Bush should begin invasion of Burma any day now..
Let's see, Massachusetts got in trouble because they didn't want to purchase Burmese made materials due to Burmas appalling human rights record.
The European Union through the WTO sued Massachusetts and won.
No, Burma is fully on board the WTO and plays globalist perspective very well. The US won't invade Burma for this reason.
OTOH Iraq was only granted observer status to the WTO last February. In time they will become members of the WTO, thanks to our "democratization" of Iraq and the laying on of a UN approved governmental framework. When we are done Iraq will fit into the UNs global framework nicely.
information from EIA on China
China's petroleum industry has undergone major changes over the last decade. In 1998, the Chinese government reorganized most state owned oil and gas assets into two vertically integrated firms -- the China National Petroleum Corporation (CNPC) and the China Petrochemical Corporation (Sinopec). Before the restructuring, CNPC had been engaged mainly in oil and gas exploration and production, while Sinopec had been engaged in refining and distribution. This reorganization created two regionally focused firms -- CNPC in the north and west -- and Sinopec in the south, though CNPC is still tilted toward crude oil production and Sinopec toward refining. Other major state sector firms in China include the China National Offshore Oil Corporation (CNOOC), which handles offshore exploration and production and accounts for more than 10% of China's domestic crude production, and China National Star Petroleum, a new company which was created in 1997. Regulatory oversight of the industry now is the responsibility of the State Energy Administration (SEA) which was created in early 2003.
With China's expectation of growing future dependence on oil imports, China has been acquiring interests in exploration and production abroad. CNPC has acquired oil concessions in Kazakhstan, Venezuela, Sudan, Iraq, Iran, and Peru, and Azerbaijan. Sinopec also has begun seeking to purchase overseas upstream assets. The Greater Nile Petroleum Operating Company (GNPOC), the Sudanese oil project in which CNPC owns a stake, began exports in August 1999. CNOOC also has purchased an upsteam equity stake in the small Malacca Strait oilfield in Indonesia. Despite efforts to diversify its sources of supply, roughly half of China's imported oil comes from the Middle East, with Saudi Arabia alone accounting for 17% in 2003.
The most significant deal thus far is CNPC's acquisition of a 60% stake in the Kazakh oil firm Aktobemunaigaz, which came with a pledge to invest significantly in the company's future development over the next twenty years. The Kazakh and Chinese governments signed an agreement in May 2004 for the construction of a $700-million pipeline to export Kazakh crude oil into western China. The pipeline would run from Atasu in central Kazakhstan to Xinjiang, supplying three refineries with about 200,000 bbl/d of crude oil. While the intergovernmental agreement cites a completion date of late 2005, this is considered unlikely, and negotiations on a binding contract and pricing continue.
Russia's Far East is seen as a potential source of Chinese crude oil imports. The Russian and Chinese governments have been holding regular discussions on the feasibility of pipelines to make such exports possible. One proposed plan is a pipeline which would carry as much as 1 million bbl/d of crude oil from Anagarsk in Russia to join the existing Chinese pipeline network at Daqing. Yukos Oil of Russia and CNPC signed a memorandum of understanding in June 2003 for sales of oil via the pipeline, contingent on the pipeline being built. An alternative plan, proposed by Russian pipeline operator Transneft, would take Russian crude from both West Siberia and East Siberia via a 1 million bbl/d pipeline to an export terminal at the Pacific coast port of Nakhodka. Japan and China each have undertaken intense efforts to sway Russia toward their preferred pipeline option. As of mid-2004, most analysts expect the Nakhodka pipeline to prevail, with Japan offering to heavily subsidize the construction of the pipeline and provide other financial assistance to Russia, but no binding agreement has yet been concluded.
China setting up strategic oil reserve
By Michael Mackey
Feb 7 2004 Asia Times
SHANGHAI - In an effort to reverse the growth of its dependence on foreign oil, China - a huge oil producer and once an exporter - is establishing a 70-75-day strategic petroleum reserve in four locations, and the first phase is scheduled to be completed in 2007. By 2020, China is expected to import 60 percent of its oil.
Total price tag: at least US$725 million for the four locations, scheduled to be completed by 2010 - maybe.
Although China's main source of energy is coal, it also dependent on oil and it is now the world's fastest-growing importer. China is the world's fifth-largest oil producer, but its reserves would last only a week.
Last May, China's State Council set up a strategic State Oil Reserves Project, but only made the decision public late last year. The State Council, an executive, cabinet-level body, has adopted a four-location blueprint and is close to approving details of the first phase of construction in Aoshan in Zhejiang province on the coast south of Shanghai.
The three-person Oil Reserves Office is headed by Bai Rongchun, who is also director general of the National Development and Reform Commission's Energy Bureau. The bureau is charged with assessing the national energy situation, evaluating future needs and recommending strategic policy changes that will ensure oil, coal and hydroelectric power to fuel economic growth.
The oil-reserve blueprint calls for four physical projects, all of them on the coast in the south and north so that port facilities can receive oil shipments. Two projects will be in Zhejiang province, one of them in Aoshan and another in Zhenhai. The other two projects will be in Huangdao in Shandong province north of Shanghai and in Dalian in Liaoning province in the north. The east coast is emerging as China's economic and industrial core.
Projected investment $725 million
These will require total investment of 6 billion yuan ($724.9 million). The China Daily and official media also report that these four will be completed by 2010 and will hold 70-75 days worth of oil, probably much of it imports. The oil tanks for the first phase will hold more than 10 million cubic meters, according to the China International Engineering Consultancy Co. Other sources say the volume will be somewhat greater.
The first phase in Aoshan is expected to cover 120-150 hectares and include a port capable of docking ships with a deadweight tonnage of 250,000. It will require an investment of 3 billion yuan ($362.7 million) to build oil tanks with a volume of 5 million cubic meters by 2007.
Zhenhai, also in Zhejiang, is expected to have the same facilities and cost about the same. No details were immediately available on the other two sites.
The government plans to finance the reserve with a special fiscal allocation and it is very likely to issue long-term state treasury bonds, establish a special investment fund, come up with new types of taxes and/or launch an oil-futures market, although a final decision has not yet been made.
The government is considering launching a specialized institution, possibly a national oil-reserves corporation, to be in charge of construction, as well as management and operation of the reserves.
China is setting up the reserve for two major, related reasons.
China too dependent on Middle East oil, The crux of the problem is that China is becoming increasingly dependent on foreign oil as its economy booms and its own reserves dwindle. That's the economic part of the problem. The second, geopolitical part is that about four-fifths of China's oil imports come from unstable parts of the world, such as the Middle East. Last year China imported 72 million tons of crude oil during the first 10 months, 13 million more than during the same period of 2002. It is now the world's second-largest importer, despite being a net exporter until 1993. China expects to import 120 million tons in 2004 and by 2020 it will be importing 60 percent of its oil.
China is experiencing a drop in production. Daqing in the northeast, the country's biggest oilfield, will see its output slide 4.3 percent to 46.3 million tonnes this year. This drop comes at a time when China already is experiencing blackouts while industrial and consumer demand is surging.
A strategic reserve would enable Beijing to cope with international crises, such as political upheaval in the Middle East that could disrupt its oil supply. A reserve also would flatten domestic oil prices when there are international price hikes - an important political consideration because lower oil prices will keep down the prices of domestic manufactured goods. The fallout from unchecked rising oil prices also could mean destabilizing popular discontent.
China may well see another financial advantage in establishing an oil reserve, though it would be sensitive to negotiate and implement. If China were to stock the reserves with foreign oil - a big "if" in itself, as it raises questions not just about the price of the deal but also about the politics behind it - it would be spending some valuable foreign currency to buy the oil. This, in turn, could reduce pressure on Beijing to revalue the yuan. The United States especially wants China to revalue its currency upward, arguing that the current rate of valuation is too low and thus Chinese goods are underpriced in world markets - to the detriment of competing US sellers.
Oil reserve just one step to energy security Establishing a strategic oil reserve is not an isolated project, but one of several steps undertaken to increase energy security. These include launching the first national geological survey on oil deposits and creating a long-term energy policy.
China is also considering directing its domestic crude tanker fleet to transport half the nation's oil imports by 2005 in a $10 billion program to improve the security of oil supply
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