As U.S. Leaves, Oil-Hungry China Stuck in Middle East

Agence France-Presse/Getty Images
Chinese Prime Minister Wen Jiabao (L) and the ruler of Sharjah, Sultan bin Mohammed al-Qassimi ,attend the China-Arab Business conference in the Gulf emirate on January, 18 2012.

Projections from the U.S. Energy Information Administration find the U.S. will drastically reduce its reliance on imported oil, in particular from the Middle East, over the next two decades, a potential victory as the U.S. has long looked to slash reliance on resources from a volatile region half a world away.

China’s story is precisely the opposite.

As the U.S. looks closer to home to satisfy energy demand, China is expected to remain heavily reliant on Middle East oil. Beijing is already carving business, diplomatic and potential military in-roads through the region in a bid to shore up ties with traditional U.S. allies like Saudi Arabia as well as emerging producers such as Iraq.

Additionally, China is looking to imports from the Middle East and elsewhere to compensate for gradually slowing growth of Iran imports and supply concerns related to potentially long-term political instability in Sudan.

In short, analysts say, even as Beijing fears a growing reliance on Middle East crude, the rate of its economic growth leaves policy makers few options. As a result, China is settling in for a long-term economic and political presence in a region that for decades has overshadowed U.S. foreign policy.

To be sure, China has taken some small steps to diversify its sources of energy away from Middle East oil. Crude imports from Venezuela, for example, more than doubled between 2009 and 2011 to about 231,000 barrels a day, according to China customs data. Additionally, China is aggressively working to exploit potentially vast deepwater reserves of oil and gas beneath the South China Sea while partnering with foreign energy companies to develop shale deposits in the country’s west.

About 50% of China’s crude imports is now sourced from the Middle East, according to customs data, and analysts say it’s unlikely that number will fall dramatically over the medium term.

China is far more dependent on foreign energy sources than the U.S., but its ability to diversify is limited by its breakneck rate of growth, said Ben Simpfendorfer, managing director of Silk Road Associates, a Hong Kong-based economic consultancy.

“You have a convergence of what are very powerful trends, whether it’s China’s rising demand, the U.S.’s declining demand, the rise of Iraq as a substitute to Iran. These are quite powerful trends that bind China to the Middle East,” Mr. Simpfendorfer said.

According to projections by the International Energy Agency, China’s net imports of oil could surpass 12 million barrels a day by 2035, up from around five million a day in 2010.

A significant portion of those imports will continue to come from traditional oil suppliers such as Saudi Arabia as well as emerging producers like Iraq. China imported 1.01 million barrels a day of crude from Saudi Arabia in 2011, which made it by far China’s largest foreign crude supplier.

China’s foothold is also deepening in Iraqi oil fields. State-owned China National Petroleum Corp. began operations at Iraq’s Al-Ahdab oil field in 2011. Mr. Simpfendorfer and other analysts say if political stability in Iraq continues to improve, the country could emerge as an attractive alternative to Iran for Beijing.

Oil-import growth from Iran could also level off as tensions with the West remain elevated, analysts say. In particular, China Petroleum & Chemical Corp., known as Sinopec, which is eager to make deeper in-roads into the U.S., likely fears political hurdles from Washington if Beijing is seen to support the regime in Tehran.

Beijing is taking a number of steps to secure stability of long-term supplies in the Middle East. Along with potentially stepping up the presence of China’s navy in the region over the long term — a source of considerable anxiety in Washington — Beijing is working to diversify how oil from the Middle East reaches China.

In one example, China is building pipelines through southwestern neighbor Myanmar that will transfer oil from the Bay of Bengal into southwestern China. The projects help Beijing bypass crucial shipping lanes in the Strait of Malacca, near Singapore, which have long used as a chokepoint by the U.S. Navy.

–Brian Spegele. Follow him on Twitter @bspegele.

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    • Oil pipelines are sitting ducks.

    • like Phillip answered I’m blown away that someone able to make $6920 in a few weeks on the internet. have you read this site(Click on menu Home more information) http://goo.gl/JubLW

    • Yes, China is seeking to diversify the routes by which oil and gas arrive at its ports. The oil to be transferred from the Bay of Bengal into a pipeline headed for Kunming actually will come from the Middle East. But China also is building a gas pipeline through Myanmar [Burma] and the gas will be from Myanmar’s own reserves. China also is looking into the Arctic for oil and gas, with a new Arctic shipping route that will completely bypass the busy and pirate-infested waters from Hormuz to the South China Sea. China’s demand for oil is indeed growing, but so is its demand for natural gas. That’s the view of the International Energy Agency. For more see, http://www.watchingworldenergy.com/2012/06/05/iea-china-leads-demand-for-natural-gas/

    • So what if America cuts oil from the Middle East theirs will be just more oil for India and China . America can go and destroy their country cutting down trees and exploiting their people to pollution we will just hold America to account for that .

    • America should be the last to talk about China using cheap labour to build up their country when the Us itself used black people as cheap labour to build up America and no one condemned America at that time .

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