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Global Energy War Looms in
MARCH 07, 2004 22:41 by Seung-Jin Kim Hyung-June Park ( sarafina@donga.com lovesong@donga.com)
 
As China consumes more and more oil, a silent energy war has broken out on a full scale. China뭩 thirst for oil is now to the point that a direct pipeline between China and Saudi Arabia, the world뭩 largest, simply won뭪 quench it.

The U.S. and Japan, the number 1 and number 2 energy consumers of the world respectively, are on alert as the more oil China wants, the less they can take. This shortage would hurt their economies.

Large energy consumers have begun to woo producers in order to gain an upper hand in the competition. Oil market watchers opined, 밫he energy issue will become an important aspect of national security.

Energy War Triggered by China

China, which exported oil as late as 1992, has become a net importer starting in 1993. Currently, it is the second largest oil consumer of the world. China is the world뭩 second largest by imported volume and the third largest by consumption growth rate. China뭩 growth rate in oil consumption is six times as large as the international average.

In 2002, on average, China consumed 19.7 million barrels daily. Apart from its daily production of 7.69 million barrels, if China consumes all of Saudi Arabia뭩 average daily production of 10.15 million barrels via a direct pipeline, it won뭪 meet the Chinese daily demand for oil.

If China뭩 economy grows by six percent annually until 2030, its demand for fossil fuel will rise to 2.4 billion tons from 850 million tons in 1999. A ton of fossil fuel is equivalent to 7.33 barrels of oil. China is projected to import 570 million tons of oil and 140 million tons of natural oil annually

In 21 out of China뭩 31 provinces, autonomous regions and municipalities, the supply of energy is running short. The National Energy Regulatory Commission of China said, 밫he production capacity of some regions has reached the ceiling.

China versus the U.S.--

China is putting all efforts into securing a supply of energy from across the world. In January, China and Saudi Arabia entered into a contract to jointly explore and produce natural gas. China and Saudi Arabia뭩 state-owned Aramco formed a $3 billion petroleum chemical joint venture. All these moves make the U.S. uneasy as it depends on two key allies in the region, Saudi Arabia and Egypt, for control of the Middle East. Some signs suggest that Saudi Arabia and China are developing a weapons-for-oil deal.

A government-sponsored energy policy group in the U.S. estimated that the U.S.뭩 dependence on foreign oil, which rose to 50 percent in 2003 from 30 percent in 1985, will reach 70 percent by 2020.

This is why the U.S. sees China뭩 search for stable energy sources as a challenge to its world hegemony. Along with the conflict over trade, military rivalry, and the space development race, the competition over energy will be an important axis of the U.S-China competition over international dominance. It explains why China does not support the war in Iraq.

China versus Japan

Japan, which has little natural resources to turn to, is probably facing an impending energy crisis.

Last year, Mitsui and Co. said it would buy 10.7 percent in the world뭩 largest natural gas project from a British developer. It prompted PetroChina, China`s state-owned oil company, to urgently negotiate with the British and they successfully appropriated some of the share the Japanese wanted.

In September of last year, Japanese Prime Minister Junichiro Koizumi said Japan would offer $1 billion in aid to Africa and cancel $3 billion in debt African countries owed to Japan. Chinese president Hu Jintao, while on his visit to Gabon and Algeria, promised to cancel $1.3 billion that 31 African countries owed to China. China signed a supply agreement for oil with Gabon and it entered into a contract to jointly explore and produce oil and gas with Egypt.

China뭩 wooing of Africa still continues. It sent a group of military advisers and about 1,000 soldiers to Africa last year.

Late last year when China and Russia entered into a preliminary agreement to build a pipeline linking oilfields in Angarsk, near Lake Baikal in Siberia, to Daqing, Heilongjiang province, Japan attempted to reverse that decision by promising to foot the bills of $5 billion in construction costs for the pipeline and $10 billion in exploration costs. Russia has yet to announce its final decision, but it is increasingly likely to route the pipeline to Nahotka, Japan.

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