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Gold/Mining/Energy : Chesapeake Energy CHK -- Ignore unavailable to you. Want to Upgrade?

To: Greed Is Good who wrote (340)	2/25/1998 2:54:00 PM
From: Mark Adams	Read Replies (1) \| Respond to of 726

Beijing Gusher from Far East Review at feer.com, free registration required. China pays hugely to bag energy supplies abroad By Ahmed Rashid in Islamabad and Trish Saywell in Beijing February 26, 1998 A freight train carrying 1,700 tonnes of crude oil crosses from Kazakhstan into China's westernmost province of Xinjiang. On China's eastern seaboard, a tanker unloads 60,000 tonnes of Peruvian crude at the port of Qinhuangdao in Hebei. These two deliveries, arriving late last year, were landmarks for China: They were the first imports from Chinese-owned oil fields outside the country. As such they marked a fundamental change in Beijing's energy policy: Instead of simply buying oil on the world market, China is buying oil fields across the globe and shipping the crude back home to meet surging demand. Since the first delivery in October, another 30,000 tonnes of crude have arrived by rail from China's Aktyubinskmunai field in Kazakhstan. And there's much more to come. In the months ahead, state-owned China National Petroleum Corp. will produce oil from newly acquired fields in Sudan, Venezuela and Azerbaijan. Moreover, if current negotiations bear fruit, CNPC may also soon hold title to oil and gas concessions in Iran, Turkmenistan and Russia. In its rush to tap the world's energy reserves, China is snapping up oilfields and bidding up their prices at a rate that would make even a Western oil giant blush. In the past nine months, CNPC has pledged more than $8 billion for oil concessions in Sudan, Venezuela, Iraq and Kazakhstan--plus $12.5 billion to lay four oil and gas pipelines (total length 13,500 kilometres) from Central Asia and Russia to China. Such huge investments underscore China's sense of urgency about securing new energy resources abroad, even if that means paying a premium--or coming into conflict with other major powers like the United States and Russia. For example, to win the bid to develop 60% of the Uzen oilfield, Kazakhstan's second-largest, CNPC paid an estimated 30% more than its nearest rival. It also promised to build pipelines from Uzen not only to China but also to Iran--something its American rivals couldn't do because of U.S. sanctions against Teheran. Iraq, too, is on China's list of budding partners. For its Venezuelan fields, CNPC offered twice as much as the next-highest bidder. "CNPC has come out aggressively to capture those deals and paid a higher price than its competitors," says Tom Ing, Beijing-based president of Amoco Orient, the American oil major that lost the bidding on Uzen. Adds John Imle, president of Unocal, another American oil giant that is feeling the heat from CNPC: "They're acquiring a lot of crude-oil resources and they're certainly very liberal in what they're paying. From that point of view they're a formidable competitor." China's scramble to build a supply network abroad is driven by a hard truth: With oil production stagnating at home and economic growth still outstripping the rest of the world's, the country won't be able to fuel itself in the future. "China needs to bring on more new energy supplies in bigger volumes and at faster rates than any other country in the world has ever attempted," Robert Simmons, chief executive officer of Houston-based oil consultancy Simmons & Co. International, wrote in a recent report. Those new energy supplies have been imported in ever greater volumes over the last three years as domestic output has failed to keep up with the booming economy. In 1994, China imported just 3 million tonnes of crude oil. In 1996, this had risen to 22.6 million tonnes. In the first three-quarters of last year, imports are estimated to have risen another 54% year-on-year to 24 million tonnes, according to China OGP, a state-run oil and gas newsletter. By some estimates, China will need to import 50 million tonnes of oil annually by 2000--about 30% of its needs. Of this, about half could come from China-owned fields abroad. Apart from its thirst for oil, China's need of natural gas is likely to almost double by 2000 as the country shifts away from coal, which currently supplies about 80% of its energy needs (and most of its air pollution). It's estimated that perhaps half of China's natural gas needs will have to be met by imports over the next 20 years. Although China is still the world's fifth-largest oil producer, its production levels have remained static in recent years as fields such as Daqing in the northeast have yielded less crude. The article goes on, but you get the flavor from this extract.