The Chinese are buying up our gas station.
China Will Strike
An Energy Deal
With the Saudis
By SHAI OSTER
DOW JONES NEWSWIRES
January 23, 2006; Page A3
BEIJING -- China and Saudi Arabia are expected to sign a wide-ranging agreement today on energy cooperation amid Beijing's quest to secure more energy resources vital to fuel its fast-growing economy.
China, the world's second-biggest consumer of oil, has been seeking to tighten economic and political partnerships with its major oil suppliers across Central Asia, Africa and Latin America. Its quest has taken on added urgency since 2004, when the country's oil demand surged about 15%, helping underpin the biggest rise in international oil prices in a generation.
Although the pace of increase in China's oil demand slowed last year, the average price it paid per 11,000 tons of imported oil surged 38% from 2004 as global oil prices hit record highs. China needs vast supplies of energy to fuel its economy, which grew about 10% last year. A key supplier to the country's fuel needs is Saudi Arabia, which accounts for roughly 17% of China's oil imports.
[King Abdullah of Saudi Arabia]
The Sino-Saudi memorandum of understanding is set to be signed during Saudi King Abdullah's three-day visit to Beijing, a Saudi official said yesterday. It will call for increased cooperation and investment between the two countries in oil, natural gas and minerals, but it won't specify any projects or dollar amounts, another Saudi official said. Other details of the agreement weren't immediately available.
King Abdullah arrived in China yesterday in the first visit here by a Saudi ruler since the two countries re-established diplomatic ties in 1990. He is scheduled to meet today with Chinese President Hu Jintao and tomorrow with No. 2 Communist Party leader Wu Bangguo and Premier Wen Jiabao. Chinese Foreign Ministry spokesman Kong Quan said last week that the Chinese and Saudi leaders are expected to discuss energy cooperation, fighting terrorism and telecommunications, among other issues.
King Abdullah's China visit is part of a four-nation Asian tour that will also include stops in India, Malaysia and Pakistan. Members of his delegation include Saudi Oil Minister Ali Naimi.
China's oil imports from Saudi Arabia have roughly doubled in recent years, from 12.5 million tons in 2002 to 22 million tons for the first 11 months of 2005.
[Growing Thirst]
Chinese and Saudi oil companies have already signed several deals. China Petroleum & Chemical Corp., or Sinopec, China's second-biggest oil producer by volume and its largest refiner, is drilling for natural gas in Saudi Arabia. The company also has signed a deal with Saudi Arabia's state oil company, Saudi Aramco, to build a huge refinery in the southern Chinese province of Fujian with Exxon Mobil Corp. as a partner. Aramco also has begun engineering work with Sinopec for a second refinery in China's northeastern port city of Qingdao.
The Saudi king's visit comes on the heels of a major diplomatic push by China in West Africa, including Nigeria, where Cnooc Ltd., China's largest offshore oil producer by volume, recently concluded a deal to acquire a large stake in an offshore oil field. Last week, Chinese Foreign Minister Li Zhaoxing traveled to Cape Verde, Senegal, Mali, Liberia and Nigeria.
China also has drawn closer recently to other large energy producers, such as Venezuela, where ties with the U.S. have frayed.
The agreement comes as renewed political instability in key oil-producing countries in the Middle East and Africa has pushed oil prices back up toward the record highs hit in the summer of 2005. On Friday, oil prices hit a four-month high of $68.35 a barrel, as traders worried that militants in Nigeria were targeting oil facilities.
Meanwhile, a political standoff between Iran and the West has oil traders nervous. The U.S. and several European nations have been calling for Iran to be referred to the United Nations Security Council over its moves to restart a uranium-enrichment program, a process that is used in producing nuclear weapons. Iran is the second-largest oil producer in the Organization of Petroleum Exporting Countries, after Saudi Arabia. Some analysts worry that it could respond to possible U.N.-imposed sanctions against it with an oil embargo.
OPEC is scheduled to meet Jan. 31 to decide on its oil-production policy for the spring. A person familiar with Saudi Arabia's oil policy said Saudi Arabia and other OPEC countries don't support Iran's call for the producer bloc to lower the group's daily oil-production quota by one million barrels. Iran says the cuts are needed to prevent overproduction from glutting the market and bringing oil prices sharply down. |
