China's Oil Dependency & Increased Naval Presence
January 1st, 2011 China has entered the new year with a new source of oil from Russia. The pipeline will be the longest in the world when completed. But China gets oil from around the world most notably Saudi Arabia, Angola and Iran. It is actively developing infrastructure including a pipeline through Myanmar to avoid the Malacca Strait for imports from the Middle East and Africa.
China has become the number two oil importer after the USA. It still has quite a ways to go before it matches the Americans in oil dependency, but it has recently outstripped Japan, now number three importer of oil.
The Chinese have also begun to flex their naval might recently sending ships into the Middle East for the first time in recent history. They have begun to assert themselves in the South China Sea and have recently had disputes with Japan over territory in the East China Sea. They have problems with the American naval presence of the coast of Korea and are developing a carrier buster missile and their own aircraft carrier. The Chinese century has begun but not quite arrived.
From Reuters
Russia in milestone oil pipeline supply to China
Sat Jan 1, 2011 10:50am GMT
MOSCOW, Jan 1 (Reuters) - Russia, the world's top crude exporter, said it had begun scheduled oil shipments to China via an East Siberian link on Saturday as the Kremlin cements ties with its energy-hungry neighbour.
With the commissioning of the Eastern Siberia - Pacific Ocean pipeline (ESPO), Moscow is carving out a large chunk of the world's second-largest energy consumers' market.
"The shipments started at 0030 (2130 GMT on Friday). We plan to pump 1.3 million tonnes of oil in January," said Igor Dyomin, a spokesman for Russian oil pipeline monopoly Transneft.
According to the final schedule for crude oil exports and transit, in January-March 2011, Russia will ship 3.68 million tonnes of oil to China via ESPO.
An annual plan envisages the supply of 15 million tonnes (300,000 barrels per day). Many oil market participants expected it would effectively double Russian sales to China, which totalled 12.8 million tonnes (308,000 bpd) in the first 10 months of 2010.
When the 4,070-km the pipeline's second stage is finished in 2013, it will be the world's longest. At a cost of $25 billion, it dwarfs all other infrastructure projects in post-Soviet Russia.
Russian state oil firm Rosneft has been sending oil to China by rail ever since it bought the biggest unit of defunct oil giant Yukos six years ago. The purchase was facilitated by a $6 billion loan from China, which effectively prepaid $17 per barrel for 48.4 million tonnes of oil.
That contract ran out this year, and Rosneft decided not to extend it, citing the low selling price. (Reporting by Vladimir Soldatkin; editing by Philippa Fletcher)
For more of this
http://af.reuters.com/article/energyOilNews/idAFLDE6BU0CK20110101?sp=true
From US Department of Energy
Oil
China is the world's second-largest consumer of oil behind the United States , and for the first time the second-largest net importer of oil in 2009. China consumed an estimated 8.3 million barrels per day (bbl/d) of oil in 2009, up nearly 500 million bbl/d from year earlier levels. During that same year, China produced an estimated 4.0 million bbl/d of total oil liquids, of which 96 percent was crude oil. China's net oil imports reached about 4.3 million bbl/d in 2009, making it the second-largest net oil importer in the world behind the United States and for the first time surpassing Japan's imports. EIA forecasts that China's oil consumption will continue to grow during 2010 and 2011, with oil demand reaching almost 9.6 million bbl/d in 2011. This anticipated growth of over 1.2 million bbl/d between 2009 and 2011 represents about 37 percent of projected world oil demand growth during the 2-year period according to the September 2010 Short-Term Energy Outlook. By contrast, China's oil production is forecast to rise by about 150 thousand bbl/d to nearly 4.2 million bbl/d in 2011. In the longer term, EIA's International Energy Outlook projects Chinese demand of liquids fuels to rise to around 17 million bbl/d by 2035. According to Oil & Gas Journal (OGJ), China had 20.4 billion barrels of proven oil reserves as of January 2010, up over 4 billion barrels from the prior year.
Overseas E&P
With China's expectation of growing future dependence on oil imports and the need for diversification of energy supply sources, Chinese NOCs have sought interests in E&P projects overseas. CNPC has been the most active company, while Sinopec, CNOOC, and other smaller NOCs have also expanded their overseas investment profile. China is taking advantage of the economic downturn and lower asset values to step up its global acquisitions and financing of projects in upstream, midstream, and downstream sectors. From October 2008 to December 2009, the major Chinese national oil companies (NOCs) invested nearly $17 billion for direct acquisition of oil and gas assets from other companies, illustrating a significant increase from the prior decade. Also, Chinese NOCs secured bilateral loan-for-oil deals amounting to almost $70 billion with several countries according to PFC Energy.
China can use its vast foreign exchange reserves, estimated at $2 trillion, to help leverage investments. China finalized loan for oil deals recently with Russia, Brazil, Venezuela, Kazakhstan, Ecuador and agreed to a loan of $3 billion to Turkmenistan to assist in developing the South Iolotan gas field project to feed the Central Asia Gas Pipeline. Turkmenistan announced in August 2010 that it is seeking another $4.1 billion for the field development. China agreed to loan Russian companies, Rosneft and Transneft $25 billlion to finance the East Siberia Pacific Ocean oil pipeline in exchange for 300,000 bbl/d of oil shipments. The Chinese Development Bank (CDB) also agreed to loan Petrobras of Brazil $10 billion so that Sinopec can access 200,000 bbl/d of oil for export to China for 10 years. China and Venezuela set up a joint $12 billion development fund to finance various projects to increase oil exports to China. Furthermore, in 2010, CNPC and PDVSA, Venezuela's NOC, set up another joint venture with $16 billion in investments to raise crude production in the Orinoco Belt by 400,000 bbl/d by 2016, and industry sources report that China recently offered another $20 billion in soft loans for oil to the country. CNPC and the China Export-Import Bank intend to lend Kazakhstan $5 billion each in two loans ($10 billion total) allowing CNPC a much larger role in the upstream oil development in the Central Asian country, following the company's acquisition of PetroKazakhstan in 2005. China finalized a $1 billion loan deal with Ecuador in July 2010 in exchange for 36,000 bbl/d of crude oil for 4 years.
China's overseas equity oil production grew significantly this decade from 140,000 bbl/d in 2000 to 900,000 bbl/d in 2008 according to FACTS Global Energy. Overseas equity oil production represented roughly 23 percent of China's total oil production in 2008. CNPC held hydrocarbon assets in 27 countries by the end of 2008 and 612,000 bbl/d of overseas oil equity production, about 70 percent of the total overseas market share from Chinese companies. Also, CNPC plans to spend $60 billion to expand overseas production to 4 million bbl/d by 2020. As China expands its refining capacity to accept sour and high-sulfur crude oil, Chinese NOCs are looking to invest in more Middle Eastern fields.
Oil Imports
The Middle East remains the largest source of China's crude oil imports, although African countries also contribute a significant amount to China's crude oil imports. According to FACTS Global Energy, China imported 4 million bbl/d of crude oil in 2009, of which approximately 2 million bbl/d (50 percent) came from the Middle East, 1.2 million bbl/d (30 percent) from Africa, 184,000 bbl/d (5 percent) from the Asia-Pacific region, and 686,000 bbl/d (17 percent) came from other countries. In 2009, Saudi Arabia and Angola were China's two largest sources of oil imports, together accounting for over one-third of China's total crude oil imports. In the first half of 2010, crude oil imports jumped to over 4.7 million bbl/d or a 30 percent year on year increase, resulting from China's increasing demand. Also, Angola has become as significant an exporter of crude to China as Saudi Arabia and in some months has been the largest supplier. As China's refineries become more sophisticated and the country seeks to diversify supply, industry reports forecast that regions outside the Middle East will slightly increase their share in the supply mix in the next year. China imported approximately 0.7 million bbl/d and exported 0.5 million bbl/d of key petroleum products including LPG, gasoline, diesel, jet fuel, fuel oil, and lubricants in 2009, and exports of products are expected to remain high as refining capacity is added in 2010 and beyond. The EIA expects China to import about 72 percent of its crude oil by 2035, a significant rise from the current 50 percent according to the International Energy Outlook.
For More China Oil Info
http://www.eia.doe.gov/cabs/China/Oil.html
From Journal Of Energy Security
China's Oil Supply Dependence
Thursday, 18 June 2009 00:00 David L.O. Hayward
CNPC, Sinopec, and CNOOC/PetroChina are vigorously pursuing oil supply contracts with foreign firms. To this end, the Chinese oil majors have acquired a variety of holdings in Angola, Azerbaijan, Canada, Chad, Indonesia, Iraq, Iran, Kazakhstan, Myanmar (Burma), Nigeria, Peru, Russia, Singapore (pending), Saudi Arabia, Sudan, Turkmenistan, Uzbekistan, and Venezuela.
In particular, PetroChina is determined to on-take oil/gas infrastructure development projects and to acquire equity in oil industry assets. PetroChina is responsible for 75 projects in 29 countries and is the world's second-biggest company by value.
Abundant with cash, the People's Republic of China (PRC) is wisely spending its US$1.95 trillion forex reserves to buy energy assets made cheaper by oil's 52.47% decline from a record US$147.27 a barrel last July.
China's economic expansion has placed it on a collision course with global competitors in the market for scarce resources including critical oil and gas supplies. The PRC accounted for nearly 40% of the increase in global oil consumption between 2004 and 2007. In a short period of time, China has evolved from a position as an oil exporter in 1992 to the world's second largest oil importer in May 2008.
China's dependence upon oil supply
China is stepping up its means to secure additional oil supply contracts around the world. The geopolitical, economic and military implications are immense.
In 2004, Chinese oil imports totalled 3.40 million barrels a day (m/bd). Today, the PRC consumes approximately 7.85 m/bd. It is estimated that China will increase oil imports to as high as 9.60 m/bd by 2010, 11.40 m/bd by 2015, 13.50 m/bd by 2020, and 16.10 m/bd by 2025.
If these estimates remain true, then China's annual oil imports will incrementally grow closer year-by-year to eventually reach about 50% of the US annual oil imports. Specifically, it is predicted China will import 53.6% of the equivalent US oil imports by 2025. China will take several more decades to equal US oil imports and thus presently remains a long way behind its US counterpart. Nonetheless, assuming China continues to expand its economy, whilst pari passu the US suffers financial meltdown and continuing recession/depression, then China's oil imports will almost certainly become closer to those of the US.
China began to suffer from oil supply shortages in 2007. These shortages led to price increases in petrol and diesel of up to 18% in June 2008. In an effort to boost domestic oil production, China has invited foreign investment in its oil infrastructure. With a shortfall of some 160,000 b/d predicted for 2010, China has asked six countries to help fill this gap. The UK, South Korea, Russia, United Arab Emirates (UAE), US and Saudi Arabia have jumped on the bandwagon. Joint venture proposals with CNPC largely relate to the mainland based refining sector and include British Petroleum (BP), South Korea's SK and LG, Russia's Rosneft, a United Arab Emirates (UAE) led investor group, ExxonMobil Corporation, and various Saudi oil enterprises. Even though in 2008 China may be able to ramp up its refinery capacity by approximately 54.5 million tons, there is still the likelihood of a gaping shortfall in oil supply.
Chinese oil supply activities overseas
Myanmar
In March 2009, China indicated the PRC is to start construction this year on oil and gas pipelines more than 2,000 km long from Kyaukypu Port on the Bay of Bengal through Myanmar to southwest China. These pipelines will pass through Kunming in Yunnan province and continue through Guizhou province to Chongqing municipality in China. The construction in Yunnan province has commenced during the first half of 2009 as part of the US$10.5B energy project. The project includes railway, road and waterway construction, as well as upgrading the port at Kyaukpyu in Arakan State. China has secured a thirty-year deal from the Burmese military junta for natural gas tapped off the Myanmar coast. China will use these new pipelines to avoid shipping crude oil and gas products through the Malacca Strait chokepoint (through which 80% of China's oil imports are channeled).
Nigeria
In Nigeria, CNOOC has purchased a 45% stake for US$2.3B in a major oil and gas field in the Niger Delta. The Nigerian output amounts to some 2 m/bd and this country is the fifth-biggest supplier of oil to the US. China has won some US$4B worth of preferential Nigerian exploration rights. Concurrently the PRC has provided military assistance to Nigeria, namely light patrol boats for the Niger River Delta, and two squadrons of F-811M jets to the Nigerian air force. Munitions assistance has also been provided to Nigeria. China is thus set to compete with the US for Nigerian oil supply.
Venezuela
To sustain future long-term contracts for oil supply, China is also negotiating with President Hugo Chavez in Venezuela. This country has been supplying the US with 3 m/bd of oil making it America's fourth-largest supplier of crude. However, China now wants some of this crude oil and will therefore directly compete with the US. To facilitate this, China has already invested US$3B in Venezuela's oil sector. In May 2008, Chinese energy company PetroChina, a subsidiary of CNPC, announced a deal with Venezuelan oil company Petroleos de Venezuela (PDVSA) to build a 400,000 b/d refinery in China's Guangdong province. The deal allows Hugo Chavez to increase his political and economic ties with China.
Sudan
Additionally, China has implemented a powerful "oil for guns" programme with Sudan. With the exception of Russia, this country has become China's largest overseas oil investment. CNPC owns 40% of the Greater Nile Petroleum Operating Company, a consortium that dominates Sudan's oil fields. CNPC has invested more than US$8B in the Sudanese oil sector, including funding for new oil pipelines. Another Chinese company, Sinopec is constructing a 1,500 km pipeline to Port Sudan on the Red Sea. China is also building a new tanker terminal at this port possibly to handle very large crude carrier (VLCC) tankers. Sudan now supplies China with 10% of its total oil imports.
Caspian
In 1997, Beijing offered US$4.3B for a large stake in the Aktobe oil field near the Caspian Sea. The PRC promised another US$3.5B to build a 3,040 km pipeline from the Atyrau in Kazakhstan to China. Although the CNPC obtained an 86% stake in the Aktobe field, the pipeline was delayed in view of its high construction costs. Three construction phases were envisioned with two already having been completed. The first phase was completed in 2003. It connects the Aktobe field with the oil hub at Atyrau. The second segment, approximately 1,000 km in length, from Atasu in central Kazakhstan to Alashankou in the western Chinese province of Xinjiang (costing around US$750M) was completed in December 2005. The third and remaining segment will link up with the completed segments and is due for completion in 2011. This pipeline will have the capacity to supply three Chinese refineries with 200,000 b/d of crude oil. CNPC also agreed to provide 20 years of development aid to the Kazakh oil firm, Aktobemunaigaz, after purchasing a 60% share of the company.
The PRC has been purchasing oil fields elsewhere in Kazakhstan. For instance, in 2003, CNPC bought a 50% share in the North Buzachi field. This field is thought to have reserves of some 2 billion barrels of oil. CNPC subsequently aligned with Sinopec to bid for the 16.78% share of the Caspian Sea offshore Kashagan reservoir held by British Gas (BG Group). The Kashagan offshore field in the northern section of the Caspian Sea is possibly the largest oil field outside of the Middle East with estimated reserves of 8-14 billion barrels of oil and natural gas. The large international consortium, responsible for developing the Kashagan field, blocked the CNPC/Sinopec bid.
The oil-consuming jackals, including China, are gathering around the shores of the Caspian Sea. They are aspiring to plunder the vast oil and gas reserves both onshore/offshore in this politically unstable region. These resources are likely to be exhausted before the end of the 21st century.
Iran
Iran supplies 11% of China's oil imports, and is therefore a crucial resource partner. Sinopec has recently implemented an oil and natural gas agreement with Tehran worth in excess of US$70B. By comparison, this huge investment is about ten times larger than the PRC's current investments in Nigeria. This is the biggest energy deal yet by any member of OPEC. Under this agreement, Beijing is committed to develop the giant Yadavaran oil field and buy 275 million tons of LPG over the next 30 years. The Yadavaran oil field is expected to produce 300,000 b/d at full capacity. Tehran has also agreed to export to China approximately 150,000 b/d of oil at market prices for 25 years. When in full production, this will more than double the Iranian oil imports quoted below for 2008. Iran could overtake Angola as early as 2011/12 and may become the PRC's second largest supplier after Saudi Arabia.
The largest Chinese oil acquisition to date is that of the Canadian oil company PetroKazakhstan. This company has large reserves in Kazakhstan. The company's assets include eleven oil fields and licenses to seven exploration blocks. Early in 2007, CNPC offered US$4.18B for the company, including US$55 cash per share and US$76 per share toward the creation of an offshoot company. This was to be led by Bernard Isautier, CEO, for PetroKazakhstan. In August 2007, PetroKazakhstan officially announced its acceptance of the CNPC offer to takeover the Kazakh oil company. The purchase was complemented by the completion of the Sino-Kazakh oil pipeline that has already delivered in excess of an estimated 300,000 b/d of crude oil to China.
Saudi Arabia
In 1999, China established a "strategic oil partnership" with Saudi Aramco, under which Sinopec would cooperate with the Saudi company in developing oil and gas fields in Saudi Arabia while Saudi Aramco would invest in refineries and petrochemical plants in China. In 2003, Saudi Aramco agreed to become part owner of a US$3.6B refinery and petrochemical complex Sinopec is building in the PRC's Fujian province. Sinopec was also awarded the right to develop natural gas in Block B of the Royal Kingdom's Empty Quarter. A few years later, in 2006, during the visit of Chinese President Hu Jintao to Riyadh, Prince Walid bin Talal, a member of the royal family, stated that "as China is a big consumer of oil, the Royal Kingdom needs to open new channels beyond the West to provide a mutual beneficial arrangement". Chinese oil imports from Saudi Arabia are set to increase dramatically. In 2008, Saudi Arabia was the PRC's largest supplier at about 725,000 b/d, followed by Angola at 596,000 b/d and Iran at 425,000 b/d.
For more of this
http://www.ensec.org/index.php?option=com_content&view=article&id=197:chinas-oil-supply-dependence&catid=96:content&Itemid=345
From the New York Times
Chinese Military Seeks to Extend Its Naval Power
By EDWARD WONG
Published: April 23, 2010
YALONG BAY, China — The Chinese military is seeking to project naval power well beyond the Chinese coast, from the oil ports of the Middle East to the shipping lanes of the Pacific, where the United States Navy has long reigned as the dominant force, military officials and analysts say.
China calls the new strategy "far sea defense," and the speed with which it is building long-range capabilities has surprised foreign military officials.
The strategy is a sharp break from the traditional, narrower doctrine of preparing for war over the self-governing island of Taiwan or defending the Chinese coast. Now, Chinese admirals say they want warships to escort commercial vessels that are crucial to the country's economy, from as far as the Persian Gulf to the Strait of Malacca, in Southeast Asia, and to help secure Chinese interests in the resource-rich South and East China Seas.
In late March, two Chinese warships docked in Abu Dhabi, the first time the modern Chinese Navy made a port visit in the Middle East.
The overall plan reflects China's growing sense of self-confidence and increasing willingness to assert its interests abroad. China's naval ambitions are being felt, too, in recent muscle flexing with the United States: in March, Chinese officials told senior American officials privately that China would brook no foreign interference in its territorial issues in the South China Sea, said a senior American official involved in China policy.
The naval expansion will not make China a serious rival to American naval hegemony in the near future, and there are few indications that China has aggressive intentions toward the United States or other countries.
But China, now the world's leading exporter and a giant buyer of oil and other natural resources, is also no longer content to trust the security of sea lanes to the Americans, and its definition of its own core interests has expanded along with its economic clout.
For more of this
http://www.nytimes.com/2010/04/24/world/asia/24navy.html?_r=1&pagewanted=1
From Wired Magazine
Is China (Finally) Building an Aircraft Carrier?
By Spencer Ackerman December 17, 2010 | 1:59 pm |
It's an article of faith in naval circles that China will inevitably emerge as one of the world's great maritime powers. But a secret plan by a Chinese government agency suggests that Beijing is taking a major seafaring step forward.
Japan's Asahi Shimbun cites a report from the State Oceanic Administration saying that China will complete construction of its first aircraft carrier by 2014, something the government never previously admitted. Constructed primarily at Shanghai, the carrier is supposed to displace between 50,000 and 60,000 tons. And it's part of an even larger effort by the People's Liberation Army Navy to "build itself up as a maritime power" during the next decade: a nuclear powered carrier is supposed to be completed by 2020. All of that should be taken with a grain of salt, but navy experts generally consider building a carrier to be well within Chinese capabilities.
The U.S. military has little visibility into the plans of its Chinese counterparts. Adm. Mike Mullen, the chairman of the Joint Chiefs of Staff, recently urged the creation of a regularized military channel between the two nations to reduce ambiguities. Defense Secretary Robert Gates is heading to China next month for the first in a series of top-level U.S.-Chinese official visits scheduled for 2011.
One measurement of the visitations' success, from the U.S. perspective, will be for China to be more open about its plans. The State Oceanic Administration, Asahi reports, says that the military decided in secret last year to build up to a "mid-level maritime power" by 2020, able to "counter challenges and threats at sea," a goal the carriers would certainly support. Elements within the military argued for keeping the carrier-building secret, so as not to spawn a wave of speculation in the region about a Chinese threat.
China got more assertive at sea this year, sending its destroyers, frigates and subs throughout eastern Pacific waters and demonstrating complex missions like mid-air refueling by its naval pilots. The U.S.'s goal is to maintain universal maritime access throughout Asia, something it fears Chinese naval might could restrict.
Naval analyst Raymond Pritchett isn't so concerned about the first Chinese aircraft carrier, figuring it to be long overdue. Given the health of China's shipbuilding industry, Pritchett forecasts that over the next five years, "we can expect steady construction of conventional and nuclear submarines, more coastal combat vessels, a large block of maritime patrol vessels, steady construction of frigate sized surface combatants, steady construction of amphibious vessels, and now steady construction of aircraft carriers."
For more of this
http://www.wired.com/dangerroom/2010/12/is-china-finally-building-an-aircraft-carrier/
From Economy Watch
Country Consumption (barrels/day) 2008 top ten
US 208,000,000
China 6,930,000
Japan 5,353,000
Russia 2,916,000
Germany 2,618,000
India 2,438,000
Canada 2,290,000
South Korea 2,130,000
Brazil 2,100,000
Mexico 2,078,000
For more of this
http://www.economywatch.com/world-industries/oil/oil-demand-oil-consumption.html
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