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Gold/Mining/Energy : TLM.TSE Talisman Energy -- Ignore unavailable to you. Want to Upgrade?

To: Tomas who wrote (670)	12/16/1999 10:57:00 AM
From: Tomas	Read Replies (1) \| Respond to of 1713

Sudan: China Takes Long View In Overseas Oil Projects - The Wall Street Journal, Dec.16 By IAN JOHNSON BEIJING -- China's leading oil engineering company has demonstrated its eagerness to expand overseas by embroiling itself in Sudan's politically charged Greater Nile oil project completed earlier this year. Now it turns out the company was so eager, it did the project without making a profit. "A Western company couldn't have done what we did," says Wang Guoqing, a vice president of China Petroleum Engineering & Construction (Group) Corp. "Sudan wanted it done in 18 months and we did it, even though we knew we wouldn't make any money." Company officials say the project -- for which China Petroleum Engineering built two wells, a 1,600-kilometer (992-mile) pipeline and a refinery -- gave them valuable experience overseas. The case shows how China is willing to sacrifice short-term gain for long-term goals. Nominally independent, China Petroleum Engineering and its parent, China National Petroleum Corp., are fulfilling Beijing's desire to secure offshore oil supplies. Since 1995, China has been a net importer of oil, prompting the government to make overseas oil exploration a national priority. Drilling Rights While China has announced several ambitious projects in other countries, such as a pipeline in Kazakhstan, the work in Sudan proceeded faster and has resulted in new oil supplies for China. In exchange for the low-cost labor, Sudan has given China National Petroleum exclusive drilling rights to more than 100,000 square kilometers near the southern Sudanese city of Bor, a region rich in oil resources. The project, though, has entangled China National Petroleum in politics. Earlier this year it had to restructure a planned stock-market listing after Sudan's human-rights critics said the listing would pump more money into the Greater Nile project, which critics say is a vital pillar for the Khartoum government and its prolonged civil war against insurgents who claim the oil as theirs. Sudanese officials say, for example, that the project will free up $200 million they were spending on oil imports. Critics allege that Sudan has cleared people out of the region where the oil is located. Several large U.S. fund managers said they wouldn't buy China National Petroleum's stock if the money would go toward the Greater Nile project. Mr. Wang acknowledges that the project is heavily politicized. A team of 10,000 Chinese laborers, for example, had to be flown in last year so the project could be completed by the 10th anniversary, in May of this year, of the assumption of power by Sudan's president, Omar el-Bashir. When the workers arrived, Mr. Wang says, they had to build their own accommodations and find their own water. Later, the Sudanese army had to protect them from guerrilla assaults when they built the Higleig and Unity wells in the country's southwest, where civil war has raged for 16 years. "Our workers are used to eating bitterness," says Mr. Wang. "They can work 13 or 14 hours a day for very little. The quality isn't as high, but we charge less." Record Revenue Mr. Wang says China Petroleum Engineering received $400 million for the Sudan project, helping to boost revenue to a record $710 million this year from $500 million last year. The company doesn't release audited figures. Labor costs are low, Mr. Wang says, because the company has a massive surfeit of labor. Although only 250 people work in the company's Beijing headquarters, it has 14,000 full-time workers in the field and an additional 140,000 contract workers. "We have to reduce our surplus labor," Mr. Wang says. Since work was completed in May, the Greater Nile project has exported little oil. It started exporting in August and sold its first 600,000 barrels to Shell Oil. Less than a month later, however, a bombing shut down the pipeline. Sudanese guerrillas claimed responsibility. Chinese media report that production has resumed, reaching an annual rate of eight million barrels.