Strategic Cooperation with ME and Africa

  1  Oil supply mode in the world  

Oil production and consumption are extremely unbalanced across
the world. The oil industry therefore became a strong worldwide
industry from the very outset. According to data from the "BP
World Energy Statistics Yearbook 2005", the total proven oil
reserves worldwide were 1188.0 billion bbl at the end of 2004.
Oil resources in the Middle East accounted for 61.7% of the world
total. The proportion was 22.1% for Saudi Arabia, 11.1% for Iran,
9.7% for Iraq, 8.2% for UAE and 8.3% for Kuwait. Their reserves
exceeded the total proven reserves of any oil producing
countries in other regions. In Central and South America,
Venezuela had the greatest oil reserves, accounting for nearly
four fifths of the regional total and 6.5% of the world total.
In Europe and the former Soviet Union, Russia had the greatest
oil reserves, accounting for 6.1% of the world total. In North
America, the United States had the greatest oil reserves - 2.5%
of the world total. In the Asia-Pacific region, China had the
greatest oil reserves, but only 1.4% of the world total. The
remaining 89.6% proven oil reserves are concentrated in the
Middle East, Central and South America and Africa. The oil
reserves in other regions put together account for less than 20%
of the total remaining oil reserves.
   North America, Europe and the Asia-Pacific region consume
most of the world's oil production - 84.1% in 2004. The proven
oil reserves in these 3 regions, however, only accounted for
20.2% of the world total and there was no great possibility for
a drastic increase of their oil output. The Asia-Pacific region
where China is located has the widest gap in oil supply and demand.
By the end of 2004, the average annual growth of oil consumption
in the region was 5.4%, much higher than the world average. The
remaining proven oil reserves in the Asia-Pacific region
accounted for only 3.5% of the world's total remaining oil
reserves in 2004, whereas the region's oil consumption accounted
for 28.9% of the world total.
    It is expected that the oil supply shortage in China will
be aggravated and its import dependence will be higher in future.
The oil import sources are concentrated far away and there are
not many transportation channels. It is therefore imperative for
China to establish a diversified oil supply strategy.


  2   Prospect of oil
cooperation with
the Middle East

China started to import crude oil from the Middle East in 1985.
Before 1993 oil was mainly imported through oil companies in
third party countries. The direct import of crude oil from the
Middle East started in 1994. The volume grew rapidly from 2000
to 2006. (Table 1) Net imports of crude oil to China were around
145.18 million tons in 2006, accounting for around 47.4% of the
total consumption. The main source (59.4%) of imported crude oil
processed in China's refineries in 2000 was the Middle East. The
proportion was 45% in 2006. With the constant increase of oil
consumption and oil import dependence, China will rely more
heavily on the Middle East. An objective look at the situation
requires China to make adjustments to political, diplomatic,
economic and trade policies toward the Middle East so as to
guarantee the long-term stable supply of this strategic
material.
   China has good relationships with major oil producing
countries in the Middle East and there are no conflicts over
fundamental interests. As early as the 1950s, China established
diplomatic relations or started trade contacts with quite a few
Arabian countries. As there were not many immediate interests
before the 1990s, however, China and the Middle East kept at a
distance in both politics and economy.
   To the Middle East, China is an emerging big power and a member
of the UN Security Council and plays a more and more important
role in international affairs. In issues related to the Middle
East, China has always adhered to the stand of supporting the
interests of most Middle East countries and created a fine
international image. The prior cautious attitude of the Middle
East countries towards China has therefore relaxed.
   To China, it is important to guarantee the urgently needed
oil supply. China started to pay greater attention to affairs
in the Middle East from the early 1990s. There are more mutual
visits of top leaders. During their visits Chinese top leaders
have expressed China's wish to promote the peace and stability
of the Middle East. The energy cooperation of both sides has
therefore gained political basis. Besides, after the September
11th event the United States has readjusted its strategy in the
Middle East and tried its best to achieve energy diversification
and reduce its own dependence on the Middle East. It has
increased the amount of crude oil imported from Western
Hemisphere countries with relatively rich oil reserves such as
Canada, Mexico and Columbia. To ensure a stable oil export,
therefore, many Middle East countries hope to find a long-term
stable big buyer. China is without doubt the most suitable choice.
Many Middle East countries (including Saudi Arabia, Oman, Yemen
and UAE) hope that China can participate in oil exploration and
development in the region. A good chance has therefore been
provided for China to expand oil cooperation with the Middle East
countries.


  3   Prospect of oil cooperation
with African oil
producing countries

Africa has very rich oil/gas resources. Development of the oil
reserves in the African continent has grown rapidly in the past
decade. According to data from the "BP World Energy Statistics
Yearbook 2005", by the end of 2004 the proven oil reserves in
Africa reached 112.2 billion bbl, accounting for 9.4% of the
world total. Oil consumption in Africa is relatively low so great
quantities of the crude oil being produced can be exported. The
daily oil output in Africa was 9.26 million bbl in 2004,
accounting for 10% of the world's total output. The daily
consumption was only 2.65 million bbl. The daily export amount
was 5.97 million bbl, second only to the Middle East. With
repeated oilfield discoveries in the Gulf of Guinea, the oil
supply in Africa will have more and more impact on the world oil
market.
   With the increase in China's oil imports and the proportion
of imported oil in its oil consumption after the 1990s, the
national government and Chinese oil companies have actively
promoted oil cooperation with African countries and
participated in the exploration and development of oil/gas
resources in Africa to guarantee oil supply security and further
diversify imports. By July 2004, the Sudan 1/2/4 project won by
CNPC produced a total of 10.3547 million bbl of crude oil. The
300 000 bbl/d oil collection station in the Sudan 1/2/4 project
was completed on May 18th, 2005. Besides, the 2.5 million t/a
Khurtum refinery jointly constructed by China and Sudan
successfully started up and the first-phase expansion project
was completed on July 28th, 2004. Projects that started
construction in 2004 also included the oilfield development
surface project in Sudan Oilfield 3/7 Area and the second-phase
expansion project in Sudan Khurtum refinery. As the economy in
Africa is relatively undeveloped and the repaying ability is