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China is the world's
sixth largest oil producer and was in fact an exporter during the 70's and
80's. As recently as 1992, China
was self-sufficient in oil and as it stands today, the world's most-populous
country is importing 40 percent of its needs. Oil makes up only 23 per cent
of the country's total energy consumption, far less
than coal, which accounted for 68 per cent. The U.S. Department of Energy
predicts the reliance of China
on foreign oil to reach 75 percent by 2025.
In the first
half of 2006, China
imported 522,000 barrels a day from Angola;
464,000 barrels from Saudi Arabia;
and about 338,000 barrels each from Iran
and Russia.
Growth in
Chinese oil consumption has accelerated mainly because of a large-scale
transition away from bicycles and mass transit toward private automobiles,
made more affordable since China's
admission to the World Trade Organization. The number of privately owned
automobiles in China
is now 23 million, more than double the figure three
years ago. By year 2010, China
is expected to have 90 times more cars than in 1990. Some projections predict
that China could surpass
the total number of cars in the U.S. by 2030.
According to Organisation
Internationale des Constructeurs
D'Automobiles (OICA), in 2005, China was the
fourth largest producer of automobiles. China
is expected to surpass Germany
in 2006.
For the first
four months of 2006, China
produced 2.6 million motor vehicles, 32 per cent more than in the
corresponding period of 2005. Low labor costs and
greater access to China's
growing market for motor vehicles have encouraged manufacturers such as Ford
and General Motors to relocate more production capacity to China.
China and Africa
ChinaChina and numerous African
countries. China's overall
trade with Africa has risen from $10.6
billion in 2000 to $40 billion in 2005. According to Chinese government the
statistics for 2006 will be larger still.
Angola is China's
most important partner on the African continent and leading supplier of oil. Angola is currently the second-largest oil
producer in Africa and may soon overtake Nigeria as its oil boom
continues. When Angola
emerged from its 27-year long civil war in 2004, China
greatly increased diplomatic relations by granting Angola a $2 billion credit line to
rebuild infrastructure. The International community criticized the action
because the loan lacked transparency or accountability.
Since 1997, China has invested billions of dollars in Sudan
and is by far the largest investor. In September 2004, the United Nations
Security Council passed Resolution 1564,
threatening Sudan with oil sanctions unless it curbed its support for janjaweed militia groups that have massacred tens of
thousands of people in the Darfur region. To
protect its oil interests in Sudan,
which supplies seven percent of China's
oil imports, Beijing
stated very clearly that it would veto any bid to impose such sanctions.
China and Iran
The Iran issue is the most recent source of
tension between China
and the West. The United States
and Europe are pushing the United Nations to impose sanctions because of Tehran's refusal to
suspend uranium enrichment programs. China has threatened to veto any
such measure as its right being a permanent member of the Security Council. China has supported the demand that Iran
curtail the program.
Mike Green, an
analyst at the Center for Strategic and
International Studies has stated that the Iran
issue is "...the first test of whether the world can influence China, or China influence
the world."
The reason
behind China's support for
Iran is from a preliminary
agreement signed in 2004 to buy a 51 percent stake in Iran's Yadavaran oil
field, located in the Western Kurdistan province near the border with Iraq.
This deal would also allow China
to buy 150,000 barrels of Iranian crude a day and 250 million tons of
liquefied natural gas at market rates for 25 years amounting to as much as
US$100 billion.
There is growing
speculation that China
will take over the Japanese contract to develop the south Azadegan
oilfield. Japan and Iran signed the US$2 billion contract in 2004,
but delays as a result of Iran's
nuclear program have resulted in Iran's
announcement that Japan
will be dropped if it fails to advance the project.
China Begins Filling
Its Strategic Reserve
In the next few
years, measures aimed at energy conservation will likely be outweighed by the
build-up of China's 800
million barrel strategic oil reserves for energy security
reasons. The first phase, to be completed in 2008, will hold about 75 million
barrels, which will be slightly less than ten days of Chinese oil consumption.
On October 9, 2006 Chinese officials announced that filling the reserve will
begin in the fourth quarter of 2006.
Two additional
development phases are planned, each of which would have a capacity of about
176 million barrels. The completion dates for these later phases have not
been set. China's
stated policy goal is to eventually have strategic stockpiles equal to 90
days consumption.
The increased
demand on world oil supplies when China
begins filling its strategic oil reserves in earnest should hopefully be
somewhat mitigated by China's
plans to spend US$15 billion to build domestic coal liquefaction plants. It
is reported that a total of 30 coal-liquefaction projects are under detailed
planning or at the feasibility stage. According to conservative estimates,
the total capacity would exceed 16 million tons. China
hopes to draw from its enormous coal deposits for conversion into oil
products and insiders predict that China's annual oil output from
liquefied coal will reach 50 million tons by 2020.
Mike Hewitt
Editor
DollarDaze.org
Mike Hewitt
is the editor of www.DollarDaze.org, a website pertaining to
commentary on the instability of the global fiat monetary system and
investment strategies on mining companies.
Disclaimer:
The opinions expressed above are not
intended to be taken as investment advice. It is to be taken as opinion only
and I encourage you to complete your own due diligence when making an
investment decision.
©
2007 DollarDaze
Information contained herein is obtained from sources believed to be
reliable, but its accuracy cannot be guaranteed. It is not intended to
constitute individual investment advice and is not designed to meet your
personal financial situation. The opinions expressed herein are those of the author and are subject to change without notice.
The information herein may become outdated and there is no obligation to
update any such information. The author,
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