CHINA AND FOREIGN OIL: IMPORTS, SOURCES, DEALS, SANCTIONS AND POLITICS

CHINESE OIL IMPORTS

China is the world’s largest importer of oil. Since the 1990s, China has been the dominant driver of the global oil market. Demand has risen almost seven-fold to more than 14 million barrels a day, according to BP Plc data, turning China from an exporter into the world's largest importer. China imported 6.71 million day in 2015, up from 3.2 million barrels a day in 2005, which in turn was a 35 percent increase from 2004, when China imported 110 million tons of oil, a 21 percent increase from 2003. Around 42 percent of the oil consumed in China in 2004 came from imports.

As China’s oil demand continues to outstrip domestic production and the country continues building its strategic petroleum reserves, oil imports have greatly increased during the past decade, reaching record highs in 2019. To ensure adequate oil supply and mitigate geopolitical uncertainties, China has diversified its sources of crude oil imports in recent years. China, which became the world’s largest crude oil buyer in 2017, imported 10.1 million barrels per day of crude oil on average in 2019, rising almost 10 percent from 9.2 million barrels per day in 2018. [Source: U.S. Energy Information Administration country analysis briefs, September 30, 2020]

China is becoming increasingly dependent on foreign oil. It went from being a net exporter of oil to the second largest importer in a little over a decade. It was self sufficient in energy until 1993 when it became a net importer of oil. China’s booming economy and an efforts to use less coal has created huge demands for oil. China’s demand for imported oil was expected to triple between 2008 and 2030. According to the Chinese government China's dependence on crude oil imports dropped for the first time in two decades in 2021, from 73.6 percent in 2020 to 72 percent in 2021.

Crude oil: imports: 6.71 million day (2015 est.), number two in the world.
Refined petroleum products: imports: 1.16 million day (2015 est.), 4th in the world.
Crude oil: exports: 57,310 day (2015 est.), 40th in the world.
Refined petroleum products: exports: 848,400 day (2015 est.), 9th in the world.
[Source: CIA World Factbook, 2022]

World’s Largest Oil Importers

World’s largest crude oil importers in 2020
1) China: 541 million metric tonnes
2) India: 201.4 million metric tonnes
3) South Korea: 133.1 million metric tonnes
4) United States: 123.8 million metric tonnes
5) Japan: 123.2 million metric tonnes
6) Germany: 83.1 million metric tonnes
7) Netherlands: 57.7 million metric tonnes
8) Spain: 55.4 million metric tonnes
9) Italy: 52 million metric tonnes
10) Thailand: 42.7 million metric tonnes
11) Taiwan: 38.3 million metric tonnes
12) France: 33.1 million metric tonnes
[Source: Enerdata Yearbook]

World’s largest crude oil importers in 2020
1) China: 10,852,615 barrels a day
2) United States: 5,877,000 barrels a day
3) India: 4,033,050 barrels a day
4) Japan: 2,472,364 barrels a day
5) South Korea: 2,660,369 barrels a day
6) Germany: 1,671,178 barrels a day
7) Philippines: 89,300 barrels a day
8) Italy: 1,014,241 barrels a day
9) Spain: 1,104,594 barrels a day
10) United Kingdom: 708,708 barrels a day
11) Netherlands: 997,769 barrels a day
12) France: 666,180 barrels a day [Source: CIA World Factbook, Wikipedia

Sources of China’s Foreign Oil

China’s top four crude oil import sources in 2017 were 1) Russia (14.22 percent), 2) Saudi Arabia (12.46 percent), 3) Angola (12.04 percent), and 4) Iraq (8.79 percent). In 2020, the top four were 1) Saudi Arabia (15.42 percent), 2) Russia (15.70 percent), 3) Iraq (11.11 percent), and 4) Angola (7.72 percent). During that time crude oil imports from Saudi Arabia and Iraq increased, while the oil imports from Angola decreased. According to Bain’s classification standard the pattern of oil and crude oil import in 2017 was in the middle and lower-centralized oligopoly type. In 2020, there were be 44 oil import sources, but the main imports were concentrated in the top eight countries. [Source: “ Analysis of China’s Oil Trade Pattern and Structural Security Assessment from 2017 to 2021" by Yanrong Huang & Dan Han, Chemistry and Technology of Fuels and Oils volume 58, pages146–156 2022]

Saudi Arabia, which historically has exported a significant portion of China’s crude oil, was the largest source of imports in 2019, with a 16 percent share. Saudi Aramco signed more long-term crude oil supply agreements with Chinese companies in early 2019 as the company focused on supplying China’s new refineries and petrochemical plants. After being China’s top source of crude oil imports for three years, Russia returned to being China’s second-largest source of crude oil imports in 2019. Crude oil exports from Russia to China began to increase following new upstream production from Eastern Siberian fields, construction of pipeline and transmission infrastructure between the countries, and China’s lifting of a crude oil import ban on its independent oil refineries in the country’s northeastern region in 2015. [Source: U.S. Energy Information Administration country analysis briefs, September 30, 2020]

China imported greater shares from the United Kingdom, Brazil, and Libya since 2017 as a result of higher production from these countries. Sanctions on Iran’s crude oil and condensate exports by the United States have significantly reduced China’s intake of oil from Iran, particularly in the latter half of 2018 and in 2019. Oil from Iran fell to 3 percent of China’s imports in 2019 compared with 8 percent in 2016, according to China’s official import data. China’s purchases of crude oil from Venezuela has dropped since 2017 because of U.S. sanctions on Venezuela and the country’s economic crisis that has severely hindered its oil production. Crude oil imports from the United States declined significantly from the 2018 level of 231,000 barrels per day. China imposed a 5 percent tariff on U.S. crude oil imports in September 2019, which reduced oil imports from the United States by 48 percent in 2019.

China imported more than half its oil in 2010. At that time it China bought half of its oil and gas from the Middle East, and bought more oil and oil products from Saudi Arabia than the United States did. China also bought sizable quantities of oil from Libya at that time, although less than it bought from Saudi Arabia. China purchased $4.45 billion worth of Libyan crude oil in 2010, according to data from Global Trade Information Services Inc.

In the mid 2000s, Sudan, Venezuela and Angola are major oil suppliers for China. China’s No. 1 supplier of crude oil was Angola. Saudi Arabia was No. 2 then. In September 2009, China said that it would invest $16 billion in Venezuela’s eastern Orinoco oil belt. Kazakhstan was viewed as a safe source of oil. Largest suppliers of crude oil to China from January to November 2004 (millions of metric tons); 1) Saudi Arabia (15.0); 2) Oman (14.7); 3) Angola (14.1); 4) Iran (12.2); 5) Russia (10.2); 6) Sudan (5.1); 7) Yemen (4.5); 8) Congo (4.0); 9) Equatorial Guinea (3.2); 10) Indonesia (3.1).

China gets a significant amount of oil from relatively small time producers. It bought 20 percent of Gabon’s annual petroleum output in 2010; and purchased 80,000 barrels from Cuba under flexible financial terms. China bought about half of Sudan’s oil exports — about 70,000 barrels a day, a relatively small amount — and had a major stake in drilling operations there in the late 2000s. China has repeatedly blocked United Nations efforts to impose sanctions on Sudan for atrocities committed in Darfur.

Global Impact of China’s Thirst for Oil

China’s hunger for oil has created higher prices around the globe as demand has increased. The increase in prices for oil in turn has caused the prices of other things made from oil likes petrochemicals and gasoline to rise. Some analysts say that the huge price hikes in oil that took place in the mid 2000s, when the price of oil reached $80 a barrel, was caused less by the war in Iraq and political instability in Venezuela than by hoarding in China. World oil demand is expected to increase dramatically as China and India become more industrialized and car-oriented.

China does not want to become too dependent on foreign oil and let its economy be influenced too much by the rise and fall of oil supplies and prices. Most of its oil comes from the Middle East, which is particularly volatile. In the late 2000s and 2010s China spent over $100 billion on oil exploration and building pipelines.

According to Associated Press:“Longer term, Chinese expansion globally will bring benefits to the U.S. and other economies. By developing as many oil wells as possible — especially in Africa, Iraq and other politically unstable regions — China will help expand supply."Frankly, the more risk-hungry producers there are, the more oil will be on the market, and the cheaper prices are," says Michael Levi, an energy policy expert at the Council on Foreign Relations. [Source: Chris Kahn, Associated Press, March 29, 2012]

Increases in demand by China has set off a mad scramble among major oil consuming nations such as the United States, Japan and countries in Europe to lock up guaranteed supplies of oil through deals, investments, development and exploration projects and elbowing rivals out of the way. China and Japan competed over oil and gas pipelines from Russia and supplies in the Middle East and are fighting over off shore sites in the East China Sea. China is also pursing deals with countries such as Myanmar and Sudan that are regarded as pariahs in the West and taken advantage of discontent with the United States to muscle into areas long regarded as U.S. domains such as Canada and Venezuela.

Explaining the appeal of working with China, an oil consultant in Saudi Arabia told the Los Angeles Times: “The Chinese don’t get involved with religion, they don’t get involved with political democracy arguments...They accept, and we accept, that we’re different. They are very technically competent and the stay out of politics.” Not everyone sees China’s behavior in the same light. Some have compared China’s behavior today — its grab for energy supplies, the build of its of its navy — with Japan’s behavior before World War II.

Chinese companies have been aggressively buying oil fields in Indonesia and Australia and trying to buy oil fields in the Middle East and Central Asia. Most of the fields that China has “locked up” are relatively small and don’t contain that much oil. Many think that China is spending too much to explore sites that have been rejected by Western companies and are too tied up places where extracting oil is difficult and expensive and politically sisky. An analyst at the National Bureau for Asian research in Seattle told the Los Angeles Times the Chinese are driven by “politically-driven panic” and “are in the mode to pay for supply security...and the economics comes second.”

Japan and China have competed over access to pipelines carrying Russian oil and drilling rights to explore for oil in a number of countries. Chinese and Indian energies companies are competing head to head for energy resources around the world. Chinese companies have beat Indian companies in drilling for big leases in Nigeria, Myanmar, Ecuador and Kazakhstan. Madhu Nainan, editor of the Indian newsletter Petrowatch, told the International Herald Tribune: “Wherever the Indians have gone, the Chinese are already there. Mostly, it is India that breeds cooperation with China — and not the other way around.” China National Petroleum Corporation (CPNC) and India’s Oil and Natural gas Corporation (ONCG) both went after $3.2 billion PetroKazakhstan and tried to obtain the $700 million Chevron stake in a Myanmar gas field. that Chevron was selling. China and India have signed energy cooperation deals. In January 2006 they agreed to team on projects such as an $800 million deal between Sinopec and ONGC in Columbia. In December 2005, India and China collaborated on a joint bid for PetroCanada’s Syrian oil and natural gas assets.

Energy and International Disputes See Japan and the Spratly islands, Under Government, International

During Ukraine War: Russia Becomes China's Biggest Oil Supplier

In the first half of 2022, during the Ukraine War, Russia became China's biggest supplier of oil, with China taking advantage of crude oil sold at discounted prices as a result of sanctions over the war. The Bbc reported: Imports of Russian oil rose by 55 percent from a year earlier to a record level in May, displacing Saudi Arabia as China's biggest provider. China has ramped up purchases of Russian oil despite demand dampened by Covid curbs and a slowing economy. In February 2022, China and Russia declared their friendship had "no limits". [Source: Peter Hoskins, BBC, June 20, 2022]

Chinese companies, including state refining giant Sinopec and state-run Zhenhua Oil, have increased their purchases of Russian crude in recent months after being offered heavy discounts as buyers in Europe and the US shunned Russian energy in line with sanctions over its war on Ukraine. The imports into China, which include supplies pumped through the East Siberia Pacific Ocean pipeline and shipments by sea, totalled nearly 8.42 million tonnes in May 2022, according to data from the Chinese General Administration of Customs.

In March 2022, the US and UK said they would ban Russian oil, while the European Union has been working towards ending its reliance on Russian gas, as the West steps up the economic response to the invasion of Ukraine. With fuel prices sky high, it isn't just motorists who are filling-up when they spot a deal. Nor is it just China which has taken advantage of those discounts on offer from Russia as the latter tries to win new custom; India has also been upping purchases. That, along with soaring crude costs, helped Russia actually grow revenues in the immediate aftermath of its invasion of Ukraine. And for every 10 barrels of Russian oil China typically bought before the war, the UK and US between them bought one. Moscow may not struggle too hard to plug at least some of the gap as those two nations take their custom elsewhere.

China Fills Up on Cheap, Sanctioned Oil From Iran, Venezuela

China doubled its imports of Iranian and Venezuelan crude in 2021, Bloomberg reported “taking the most from the U.S.-sanctioned regimes since 2018 as refiners brushed off the risk of penalties to scoop up cheap oil. Crude processors in China imported 324 million barrels from Iran and Venezuela in 2021, about 53 percent more than in 2020 according to data from market intelligence firm Kpler. In 2018, China purchased 352 million barrels from the two nations. [Source: Bloomberg News, January 11, 2022, 3:05 PM

“Chinese buyers, particularly private refiners, have benefited from Washington’s tough line on Iran and Venezuela, continuing to buy their oil long after their counterparts elsewhere in Asia ceased purchases. The risk that non-U.S. entities may lose access to the U.S. financial system or have their American assets frozen if found guilty of breaching the sanctions hasn’t dissuaded them.

“Sanctioned oil is typically transported on old ships that would have otherwise been set for the scrapyards, providing cost savings, Anoop Singh, head of tanker research at Braemar ACM Shipbroking Pte Ltd, told Bloomberg. Cargoes may be shipped directly from the country of origin on tankers that have gone dark — meaning their transponders are turned off — or transferred between vessels at sea to mask where the crude has come from, he said. Iranian and Venezuelan crudes are often re-branded and passed off as oil from Oman and Malaysia. China hasn’t received any Iranian crude since December 2020, while imports from Oman and Malaysia have risen, official data show.

China’s Search for Oil Abroad and Dangers to Chinese Workers

China seems to be making deals with every oil producing nation there in an efforts to secure enough oil for its long term needs. As of 2004, China had invested more than $15 billion in global oil exploration ventures and had plans to spend 10 times that amount over the next decade. It was also throwing about large amounts of money to secure long term contracts for oil. China is cooperating with 27 other countries in oil exploration ventures. Chinese oil companies have invested heavily in projects in Kazakhstan, Iraq, Iran, Venezuela, Russia, Nigeria, and Kuwait and unlikely places like Sudan, Myanmar, Peru, Australia and Syria. In many of these places it is building roads and ports in exchange for oil supply contracts. Human right records, good or bad, make little difference to China.

China often goes to places the major oil companies have skipped over because they are not profitable enough. It has secured gas rights from Uzbekistan and invested $200 million in oil and gas in Myanmar. For a while, China took reat interest in the oil sands in Canada and has invested in mining companies there and on a pipeline that moves oil from the interior of Canada to shipping ports on the Pacific where the oil can be transported to China. China is deeply involved in developing the Athabasca oil sands — the world’s largest petroleum resource — in Fort McMurray in northern Alberta Canada with the Syncrude, a giant Canadian oil producer. Part of the projects has included wooing an Indian chief that controls the land where the development is taking place.

China is aggressively going after natural gas in Turkmenistan, investing a lot of money to develop a site there and build a pipeline from Turkmenistan to China. This puts it at odds with Europe, which also wants gas from Turkmenistan, which is roughly equidistant between Europe and China. Unlike the European Union, a 30-nation consortium, that takes its time to make a decision, China can mobilize its resources quickly and move decisively which it has done on Turkmenistan. Getting gas from Turkmenistan also makes China less reliant on gas from Russia. In April 2009, the China National Petroleum Corporation (CNPC) outbid rivals from India and Russia to obtain Mangistaumunaigaz, Kazakhstan’s fourth largest oil company.

Chinese energy workers have been targeted by insurgents and kidnappers. Over the course of a few week, Chinese oil-drilling contractors working for a subsidiary of state-controlled Sinochem were kidnapped by leftist guerrillas in Colombia, a Chinese hydropower project in Burma has gotten caught up in fighting between Kachin rebels and government forces, and some 35,000 Chinese workers on oil projects and other enterprises have fled Libya to escape violence there. In late January 2012, rebels in Sudan kidnapped 29 Chinese workers from a camp run by China's Power Construction Corp. in volatile South Kordofan. Eighteen other workers in the camp escaped the raid, which the Sudanese military blamed on the Sudan People's Liberation Movement-North -- a rebel force in the border region with neighboring South Sudan. One worker died in the raid, according to Xinhua. About a week later the workers were released An additional 25 Chinese workers were abducted by restive Bedouin tribesmen in Egypt’s Sinai Desert.[Source: Peter Shadbolt, CNN, February 7, 2012 ]

China and Middle Eastern Oil

China gets much of its imported oil from the Middle East, mostly Saudi Arabia and Iraq. In 2006 China got 45 percent of its oil from the Middle East. Before that it got as much as 85 percent. In December 2005, OPEC began negotiating directly with China. OPEC nations are looking to work out long-term contacts with China. As of 2006, China got 14 percent of its oil with Iran. A large area in Iran’s Azadegan field that originally was going to be developed by Japan was given to China

in March 2021, Saudi Aramco said would ensure China's energy security remains its highest priority for the next 50 years and beyond. At that time Saudi Arabia, the world's biggest oil exporter, was China's top supplier. Saudi Arabia and Kuwait have invested heavily in Chinese refineries to keep China as a reliable customer. Kuwait built a $5 billion refinery and petrochemical plant in Guangdong Province; Saudi Arabia spent $3.5 billion upgrading a refinery in Fujian Province. In January 2006, during a visit by King Abdullah of Saudi Arabia to Beijing, China and Saudi Arabia signed an energy deal that call for “cooperation in oil, natural gas and minerals” that paved the way for guaranteed energy supplies from Saudi Arabia to China and investment by the Chinese in energy development projects in Saudi Arabia.

China is drilling for oil in Saudi Arabia and has entered into energy development deals with Iran. In October 2004, Beijing signed a 30-year, $70 billion deal to give Chinese companies a 51 percent stake in the huge Yadavaran oil field, Iran’s largest offshore field. along with a promise to develop an untapped area. Parts of the deal were finalized in 2007 while the United States was discouraging such deals as it tried to isolate Iran and impose sanctions on it overs its nuclear weapons program. In July 2009, Chinese and Iranian officials signed a deal that would give China most of a new concession in Iran’s Azadegan oil field, largely seen as a blow to Japan which had wanted the stake.

China is a major trading partner with all the countries in the Persian Gulf, supplying them with a wide range of products and getting oil and gas in return. Trade between the Persian Gulf states and China reached $20 billion in 2004, up from $16.9 billion in 2003. Trade between Iran and China reached $7 billion in 2004, up from $5.6 billion in 2003. China has angered Washington by offering to help Iran with its nuclear program.

China, Iraq and Oil

China had a deal with the Saddam Hussein government in Iraq to develop oil fields there. But everything changed after the U.S. invaded Iraq and threw the Saddam government out. China’s experience in Iraq was valuable lesson. It showed Beijing that it needed to find oil outside the Middle East and that it was in head to head competition with the United States for the world’s oil. In Iraq, China seized the moment, responding quickly, flexibly and on the terms of its hosts.

In 2013, Tim Arango and Clifford Krauss wrote in New York Times: “Since the American-led invasion of 2003, Iraq has become one of the world’s top oil producers, and China is now its biggest customer. China already buys nearly half the oil that Iraq produces, nearly 1.5 million barrels a day, and is angling for an even bigger share, bidding for a stake now owned by Exxon Mobil in one of Iraq’s largest oil fields. “The Chinese are the biggest beneficiary of this post-Saddam oil boom in Iraq,” said Denise Natali, a Middle East expert at the National Defense University in Washington. “They need energy, and they want to get into the market.” [Source: Tim Arango and Clifford Krauss, New York Times, June 2, 2013]

“Before the invasion, Iraq’s oil industry was sputtering, largely walled off from world markets by international sanctions against the government of Saddam Hussein, so his overthrow always carried the promise of renewed access to the country’s immense reserves. Chinese state-owned companies seized the opportunity, pouring more than $2 billion a year and hundreds of workers into Iraq, and just as important, showing a willingness to play by the new Iraqi government’s rules and to accept lower profits to win contracts. “We lost out,” said Michael Makovsky, a former Defense Department official in the Bush administration who worked on Iraq oil policy. “The Chinese had nothing to do with the war, but from an economic standpoint they are benefiting from it, and our Fifth Fleet and air forces are helping to assure their supply.”

“The depth of China’s commitment here is evident in details large and small. In the desert near the Iranian border, China recently built its own airport to ferry workers to Iraq’s southern oil fields, and there are plans to begin direct flights from Beijing and Shanghai to Baghdad soon. In fancy hotels in the port city of Basra, Chinese executives impress their hosts not just by speaking Arabic, but Iraqi-accented Arabic. “Notably, what the Chinese are not doing is complaining. Unlike the executives of Western oil giants like Exxon Mobil, the Chinese happily accept the strict terms of Iraq’s oil contracts, which yield only minimal profits. China is more interested in energy to fuel its economy than profits to enrich its oil giants.

“Chinese companies do not have to answer to shareholders, pay dividends or even generate profits. They are tools of Beijing’s foreign policy of securing a supply of energy for its increasingly prosperous and energy hungry population. “We don’t have any problems with them,” said Abdul Mahdi al-Meedi, an Iraqi Oil Ministry official who handles contracts with foreign oil companies. “They are very cooperative. There’s a big difference, the Chinese companies are state companies, while Exxon or BP or Shell are different.”

“International energy experts said the Chinese had a competitive advantage over Western oil companies working in Iraq. They noted that the Chinese, unlike many Western oil companies, are willing to accept service contracts at a very low per barrel oil fee without the promise of rights to future reserves. While private oil companies need to list oil reserves on their books to satisfy investors demanding growth, the Chinese do not have to answer to shareholders. “The Chinese companies and their workers also win high marks for their technical expertise, as long as they are not working in complicated oil fields, like those in deep waters. “They offer a lot of capital and a willingness to get in quickly and with a high appetite for risk,” said Badhr Jafar, president of Crescent Petroleum, an independent oil and gas company based in the United Arab Emirates and a big gas producer in Iraq. He said the Chinese were vital to Iraq’s efforts to expand oil production, adding, “They don’t have to go through hoops to get people on the ground and working.

Iraq-China Oil Deals

In August 2008, China and Iraq signed an oil deal with an estimated worth of $3 billion. The first major oil deal that the Iraqi government made with a foreign country since the U.S.-led invasion in 2003, the deal was signed by the Iraqi government and the China National Petroleum Corporation (CNPC) and is largely seen as a Chinese beachhead into oil-rich Iraq. According to the terms of the 20-year deal China will help Iraq develop the Ahdab oil field southeast of Baghdad and be paid for the service not a share on the profits. The deal is a revival of a contract struck with te Saddam Hussein in 1997 that was sidetracked by United Nations sanctions and the invasion. It calls for production to begin at 25,000 barrels a day and advance to 125,000 barrels a day.

In October 2009, Iraq signed a deal with CNPC (China National Petroleum Corporation) and Britain’s BP to develop the massive Rumaila oil field. CNPC and BP promised to invest $50 billion in developing the Rumalia oil field in Iraq, a plan that could triple the oil field’s output. The agreement was the first big oil deal for Iraq since the 2003 invasion. It appears that China was able to win the deal and get a jump on its rivals because of willingness to put up with security risks.

In 2013 the New York Times reported: “China is making aggressive moves to expand its role, as Iraq is increasingly at odds with oil companies that have cut separate deals with Iraq’s semiautonomous Kurdish region. The Kurds offer more generous terms than the central government, but Iraq and the United States consider such deals illegal. In 2012, the China National Petroleum Corporation bid for a 60 percent stake in the lucrative West Qurna I oil field, a stake that Exxon Mobil may be forced to divest because of its oil interests in Iraqi Kurdistan. In November 2013, Exxon Mobil handed over a 25 percent stake in Iraq's West Qurna-1 oilfield project to PetroChina. A few months earlier Iraq said that Exxon was selling more than half of its 60 percent holding in the field. Along with the stake going to PetroChina, 10 percent is expected to be sold to Indonesia's Pertamina, according to Iraq. [Source: Reuters, November 28, 2013; Tim Arango and Clifford Krauss, New York Times, June 2, 2013]

China’s Quest for Oil in Latin America

China has a $1 billion deal with Brazil that includes building a pipeline and is developing fields in Venezuela. It looking for natural gas in Bolivia; and working out deals with Mexico and Cuba. . In March 2010, CNOOC paid $3.1 billion for a 50 percent stake in Bridas Corp., an Argentine energy firm with oil and gas assets in Argentina, Bolivia and Chile.

In October 2010, Sinopec said it planned to spend $7.1 billion for a 40 percent stake in Repsol Brasil’s deepwater oil assets in Brazil. Repsol Brasil is a subsidiary of Spain’s largest oil company. The deal gives China a major stake in one of the world’s largest oil frontiers. By some estimates the vast subsalt areas hold 50 billion barrels of crude.

China receives 460,000 barrels of oil a day from Venezuela to repay an $8 billion loan from China to Venezuela for infrastructure projects. China has a similar deal with Brazil’s state-run oil group Petrobras, giving it a $10 billion loan return for 200,000 barrels of oil a day. In May 2010, Venezuela agreed to a $20 billion loan from China that is part of deal to pump oil from the Orinoco Belt. In 2009 Venezuela borrowed $6 billion from China and agreed to increase its oil exports to China, bringing China’s total investment in the country to $12 billion.

China’s Quest for Oil in Africa

China is building roads, electricity facilities and nice homes for government officials in Africa in return for permission to drill in remote sites. China has committed $2 billion in Angola on field that only has an output of 10,000 barrels a day and has a 40 percent stake in the Greater Nile Oil project in Sudan. It also has deals with Gabon and Cameroon and is planning to help Niger look for oil. China negotiated a $2.3 billion investment in an oil and gas field in Nigeria and has explored for oil in the Congo.

Africa has been China's biggest source after the Middle East. Andrew Higgins wrote in the Washington Post: The country’s largest African supplier by far was Angola, but most of that oil was simply purchased, not produced, by Chinese companies. In the Sudan region, by contrast, CNPC — the dominant partner in foreign consortiums operating there — actually pumped the oil from the ground. [Source: Andrew Higgins, Washington Post, December 24, 2011]

China, which gets nearly a third of its imported crude oil from Africa, has invested billions of dollars in the past 15 years to pump crude from this war-scarred land. But the division of what until five months ago was a united country has pushed Beijing into a political minefield in defense of its assets, straining China’s “just business” insistence that it doesn’t get involved in the internal affairs of foreign lands.

Chinese customs figures show that China imported 92 million barrels of crude from Sudan in 2010 — or 70 percent of Sudan’s total oil exports as reported by the then united country’s Central Bank. China is also Sudan’s main supplier of arms and has big interests in railways and other Sudanese ventures. China’s economic interests in Sudan are so substantial that, according to a 2008 State Department cable published by WikiLeaks, ICC prosecutor Luis Moreno-Ocampo told the United States that they trump Beijing’s loyalty to Bashir. China “does not care what happens to Bashir, and would not oppose his arrest if its revenues were not interrupted,” Ocampo was cited as saying in a cable under the heading “China only wants oil, it doesn’t care about Bashir.” [Source: Andrew Higgins, Washington Post, June 22, 2011]

CNPC, South Sudan and Sudan

Andrew Higgins wrote in the Washington Post: China’s involvement in oil ventures in Sudan “revolves largely around the interests of a single company, the China National Petroleum Corp., or CNPC, a state-owned giant that, in its quest to match the global reach of Western oil majors and to feed China’s appetite for fuel, has dragged usually risk-averse Chinese diplomats into one of Africa’s most poisonous feuds. CNPC first plunged into Sudan, taking over fields originally developed by the U.S. company Chevron, which, alarmed by mounting violence, had pulled out. Shortly after this, Washington in 1997 imposed economic sanctions on Sudan, which it declared as a “sponsor of terrorism and a relentless oppressor of its minority Christian population.” [Source: Andrew Higgins, Washington Post, December 24, 2011]

As Western companies retreated from Sudan as the violence escalated there, CNPC advanced, boosting production and investing in a pipeline to the Red Sea that, in 1999, allowed the first oil exports from Sudan. Stories spread of atrocities linked to CNPC’s oil wells, including accounts of Chinese-supplied helicopters gunning down villagers as the Sudanese military moved in to clear and secure oil-producing areas. Not all of the accounts were true, but CNPC, steeped in the secretive ways of China’s ruling Communist Party, which appoints the company’s boss, mostly ignored pleas from outsiders for information and access. By the time Sudan and southern rebels signed a peace accord in 2005 to end Africa’s longest civil war, “China was the devil in the minds of many people here,” said Alfred Sebit Lokuji, an expert in local development at Juba University.

Roughly 75 percent of the Sudan regions’s oil wealth lies in now South Sudan, which officially become a separate state in July 2011. When CNPC first took a stake in oil fields here in 1996, China placed all its chips on a brutal regime in Khartoum. With same rebels who battled Khartoum now running ministries in Juba in the new country of South Sudan, China is rushing to hedge its bets, offering Khartoum’s foes in the south a package of development aid and low-interest credit that hasn’t been announced but that officials here say could be worth as much as $10 billion. China has tried to stay neutral but gets sniped at by both sides. “It’s a dilemma for China,” said Cui Shoujun, director of the International Energy Research Center at Renmin University in Beijing. China “tries to balance the south and the north but hasn’t come up with an effective way to do this.”

As of 2011, South Sudan got 98 percent of its revenue from oil pumped by CNPC-led foreign operators. “ When it became clear independence for South Sudan was likely, China shifted gears, opening a diplomatic mission in Juba and reaching out to the SPLM. CNPC also set about mending fences, funding a computer center at Juba University. When Sudan split in July, the oil company began moving staff members from Khartoum to Juba, setting up offices, a dormitory and a canteen in a cluster of prefabricated huts at a Chinese-run hotel. China’s embassy is in the same compound. South Sudan has tried to woo Chevron, Halliburton and other U.S. oil companies but found no takers, leaving China as its only real economic partner.

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Text Sources: New York Times, Washington Post, Los Angeles Times, Times of London, The Guardian, National Geographic, The New Yorker, Time, Newsweek, Reuters, AP, Lonely Planet Guides, Compton’s Encyclopedia and various books and other publications.

Last updated June 2022