• am
  • ru
  • en
print version
21.12.2006

China’s oil and gas investments in Middle East

   

Sevak Sarukhanyan 

During the last ten years there is a sharp rise in the extent of gas used in China, conditioned by the latter’s rapid development of economy. Thus there is a necessity to carry out the prospective program of importing gas and oil from abroad.

China is quite realistic in its appreciations concerning to dependence on oil and gas exporters. It makes Beijing carry out active investment programs in energy markets of oil and gas supplying countries, which is intended to solve two main problems.

  • To ensure China’s participation in the global energy market,
  • To restrict free activity of the states and their allies exporting oil and gas and in this way to stabilize oil and gas import into China.

In this article we will speak about the main energy investment programs of China which are carried out in Middle East. Let’s point out that oil is mainly imported to China from Middle East. The extent of Near Eastern oil in 2030 may constitute 84% of oil imported to China.

1. Middle East

Iran

In spite of widespread opinion, China hasn’t been granted direct or privileged status by Iran to make investments. Like all the international companies, the Chinese companies in Iran also work on the basis of “buyback” investment principles. This principle was worked out still in the beginning of 1990s by active participation of Iran’s former president A.A. Hashemi-Rafsanjani and its main peculiarity is: international companies develop oil or gas mines to the point of mining. After that, the mines are handed over to Iran’s National Oil Company (NOIC), which, as a result, becomes the only owner of them. And the international companies, making investments in Iran, cover their expenses and get some profits by NOIC in the face of free of charge oil supply.

The main prospective of investment made by China by the principle of “buyback” may be considered the mining of Yadavaran’s oil and gas field and the construction of gas liquidating factory. On October 2004 Iran and China signed a declaration on this field’s mining, according to which, after the mining work is over China will have a right and be obliged to buy 150 thousand barrels of oil a day and 10 million tones of liquidated gas a year within 25 years. Besides, China is committed to construct a gas condensation factory costing $1.5 billion in the territory of the port of Bender-Abbas.

However, it is worth mentioning that besides the declaration, no other agreement was signed between Iran and China. The conclusion of agreement to begin the work is mainly suspended by the Iranian party.

The next prospective program of China in Iran may be considered to be the development of Azadegan oil plant. In the international consortium there China has a share of 25%. However, according to some news spread in 2005, Japan, with 50 % of shares in the project, is likely to lave the program. There are two main reasons why it should leave the program.

  • Japan is eager to leave Iran before the US-Iran possible war.
  • Iran forces out Japan by itself to hand the program to China.

On October 2006 Iran has reduced Japan’s share to 10% connected with the latter’s slow pace of the supply of equipments. However these free shares haven’t been given to Iran yet. According to the latest information, Iran has begun negotiations with India on the project.

Iraq

Before the collapse of Husein’s regime by the US, China had come to an agreement with Iraq on the mining and developing the oil plant of Al-Adhab in the south of Iraq. This oil plant will provide a chance to mine up to 90 thousand barrels of oil per day.

In 2004 the Iraq’s new government renounced the agreement signed between the Sadami Iraq and China. However, at the end of October, 2006 Iran’s minister of oil Hussein al-Shahristani paid an official visit to Beijing. The main subject of Chinese-Iraqi negotiations was the revival of the agreement on Al-Adhab oil plant mining. According to the latest information, the intergovernmental agreement on Chinese-Iraqi cooperation in the energy field is envisaged to be signed in the beginning of 2007.

Oman

Oman is one of the main countries exporting oil to China. However, the Chinese capital penetrates into the Oman energy market very slowly.

In 2002 Chinese Sinopek was the first to undertake the management of the first little oil plant in Oman. China bough management rights from the Japanese companies. Oil mining from this plant by China within 4 years from 2 thousand barrels was rose up to 12 thousand barrels per day.

In August 2004 for the first time China gained a right to take part in the mining of Oman’s new oil plant. According to Chinese-Oman agreement, China will begin the mining of the 36th and 38th blocks of so called “Southern large oil plant”. As soon as it begins oil mining, China will manage this oil plant in three years term and during these three years it will get the whole extent of the mined oil free of charge, to cover its expenses.

At the same time China invests quite a large amount of money in the field of development of Oman’s oil-chemical industry. At present the Chinese build an oil-chemical factory and two educational centers in Oman. The overall investment of China in the energy field of China is over $600 million. And the investments made in Oman in general exceed 1 billion.

Yemen

An agreement was signed during the official visit paid to Beijing by the head of Yemen Ali Abdullah Sale in 2004 on establishing cooperation in energy field. Today China is mining two new oil plants in Yemen. The oil mining will begin in 2007, which will not be of great extent.

China’s investments made in Yemen in the energy field reach up to $80 million. The overall investments in Oman economy exceed $200 million. In spite of this fact, China’s actives in the region are not that high and by their general quantity yield to Japan’s actives by more then five times. In general Beijing’s efforts to strengthen its own energy influence in the region end up only with comparative success. That makes China make more active steps directed to Central Asia, South Africa, Venezuela and Caspian.


Return
Another materials of author