User:Lsanche2/ChinaOilunderconstruction

China’s growing population and their ideology affects their oil situation. It highlights the current set up of the government, their relationship with surrounding states, and steps they are taking to play a positive role in the worldwide community.

China

Chinese Government

It is important to understand the make-up of the government in order to highlight the relationship China has with neighboring states. It is up to the Chinese government to foster a healthy relationship with neighboring states, because of the co-dependence of resources in the region. China has a growing population of over 1.3 billion people; therefore they rely heavily on other states for resources, such as oil. The Chinese government is taking diplomatic action to improve their relationship with ASEAN states. Most recently, China has participated in the ASEAN Regional Forum, a conference that brings states together to talk about security, defense, and political issues in the region.

The Chinese government is separated into three main parts, the National People’s Congress, the State Council, and the Presidency. The National People’s Congress (NPC) holds a great deal of responsibility in China and has the power to write and amend the constitution. They also hold the power to elect the president and vice president of China, committee members of the NPC, the head of the State Council of China, the president of the Supreme Court, and other high ranking officials, and with this; they have the power to remove any of the aforementioned individuals. Individual provinces throughout China elect the members of the NPC. The worldwide community does not regard the elections as democratic, because of the limited choice of candidates. The Communist party influence is the main influence in China, therefore candidates from other parties are not considered.

Second, the State Council is the body of ministers that takes care of social and state programs such as education, foreign affairs, finance, and national defense. The premier acts as the head of the State council and is nominated by the president and approved by the NPC. The ministries develop foreign policies, environmental protocols, and education guidelines, etc.

Third, the President of China is the highest-ranking individual in the government. The president’s main duties include appointing officials, declaring war and martial law, and publicly announcing laws formulated by the NPC. The Chinese government is viewed as on oligarchy because of the power of the NPC holds a lot of the ruling power in the state.

The Chinese government has to take extra strides to secure good relationships with its neighbors. Malaysia is a neighbor state that is often seen as in contention with China because of political differences. China can be a very intimidating neighbor because of the power it holds in the worldwide community. Because they are such a massive exporter, they have a lot of power and ability to control smaller states. Also, there are security factors to consider when talking about the relationship with smaller, neighboring states. Yet, the relationship with Malaysia is symbiotic because of their large supply of oil and their need for security assurances from China. Malaysia is the number one producer of petroleum in the South China Sea, and they account for over one half of the production in the region.

China is one of Malaysia’s top importers, and it is anticipated that they will continue their trade relationship in the future. They are going to great lengths to show their commitment to a strong partnership. They are starting to agree on political, security, and economic ideologies and policies.

History

Southeast Asia is sitting on large pockets of natural gas, oil or “petroleum” and its revenues are continually dictating and defining the wealth and power of individuals, multinationals and groups alike. Brunei, Vietnam and Malaysia, in addition to Indonesia, benefit from the latest trend, although recent attention has been drawn inexplicably to the Southeast Asian and China seas for their oil-rich reserves, knowledge of this region’s capabilities has been largely held for more than a century. Indeed technology has evolved along with the respective forms of exploration and production, but the oil rich pockets in these areas have not only been known of, but foraged. A brief pre-20th century timeline follows.

Although, the historical records of how Southeastern Asian oil was born are a bit anecdotal and read more like a novel then a timeline, it is largely understood that in 1883, a Dutch planter. A.J. Zijiker was exploring the exterior of Sumatra, an Indonesian Island when he was struck by a tropical storm. Seeking shelter on nearby island, Zijiker witnessed a Sumatran local watchman light a fire from wet twigs using a bamboo torch. Naturally curious, the planter inquired about the burning capabilities of the torch and was soon after taken to a small pond filled with the black fluid now so often sought after.

In the year following, Zijiker commenced the drilling of the now-well known Telega Tila oil well in Northern Sumatra. It was from this well that Royal Dutch Shell was formed, today widely held and publicly owned as Shell. It is generally understood that Zijilker's endeavor and others similar to it catalyzed the modern petroleum industry in Southeast Asia and connected the region's resources to the world’s energy markets.

Though off-shore drilling was not a practiced first used in South Eastern and in China, it reared its head after petroleum drilling in the Gulf of Mexico proved to a highly lucrative endeavor in the years following World War II. Because of the vast areas of relatively shallow waters surrounding Indonesia and Southeastern Asian countries, drilling in these areas was a clear and easy conclusion to draw. Shell, the first to discover oil in these areas, naturally brought the first offshore drilling rig here, specifically to the Brunei coast in 1958. Brunei would later evolve into a joint venture owned in equal shares by the Brunei Government and the Royal Dutch/Shell group of companies.

Today, it is indeed an exaggeration to claim that Southeastern oil capabilities (in-ground oil and production possibilities) rival that of the Middle East, because they do not and could not compete with it. However, because of the tightening competition to obtain the resources in the global market, the oceans in Southeast Asia are now some of the most active area of offshore exploration in the world. The impetus behind this in recent decades can be largely attributed to three phenomena: technological innovations in the industry, political developments in Southeast Asia and the Middle east, and the emergence of Japan as a hot-spot for petroleum trade operations.

Looking to capitalize on petroleum trade and looking to participate in the growing demand and marketplace for the black liquid, China pursued domestic opportunities (before the 1950’s importing all of its oil needs). Because of the relatively assembly line method behind Chinese oil exploration in the years following 1950 a bulleted, chronological presentation would better suit the information.

• 1959: Vast reserves discovered in Songhua Jiang-Liao basin in northeast China. • 1960: Daqing oil field in Heilongjiang Province becomes operational. • 1963: By this Time Daqing oil field producing nearly 2.3 million tons of oil. • 1965: As Daqing production wanes, oil fields in Shengil, Shandong, Dagang, and Tianjin yield enough oil to nearly eliminate the need of importing crude oil. • 1973: As production rates increase, China explores exportation possibilities-- exporting of crude oil to Japan begins. Offshore drilling exploration begins as well. • 1974: Exports increase to 6.6 million tons. • 1978: Exports increase to 13.5 million tons. • 1985: “” 20 million tons. • 1993: Internal demand for oil exceeds its domestic production—exports no longer possible.

As production exceeded it’s demand, exporting of oil to its former largest importer, Japan, became impossible. Since it’s first days as a modern day importer (as opposed to its oil importing days before the 1950’s) in the 1990’s it has grown to be the second-largest oil-consuming nation, next to only the United States5. Much of China’s oil imports derived largely from Southeast Asia, but it’s, again, growing demand has forced importing needs to all over the globe.

At this moment, Southeast Asia produces nearly 2 million barrels per day (as well as 500 million cub feet natural gas). However, the region's main oil producers, Indonesia, Malaysia and Vietnam, are planning for a future as oil importers as their oil output declines and domestic demand rises.

Current Situation and Future Plans

China’s oil relationship with other countries has shifted from a world exporter to a world importer. This shift to dependence on foreign oil has changed the exploration and acquisition policies of China. China’s oil need overwhelms its internal capabilities. Oil acquisition is now a process of investment in foreign lands and a creation of an internal oil reserve in case of emergency. China has taken steps to alter its security polices in places in the world that are rich in oil. China National Petroleum Corporation is invested in producing, marketing, and supplying oil in China . This company supports internal sources of oil production and reserves. Domestic oil production supplies only two thirds of the countries oil needs and it is estimated that China will require 600 million tons of crude oil by 2020. This statistic is horrifying considering that most of the oil fields in the world are already claimed. It is a statistic that has required China to take drastic measures with its internal oil reserve programs. A purely importation driven oil plan would leave China vulnerable to market fluctuations and more susceptible to international oil conflicts due to their dependence.

To combat this dangerous position of foreign dependence China is investing in its first national oil reserve bases a program beginning in 2004. There are three different providences that they are focusing on. The first Zhoushan, Zhejiang Province, was build by Sinopec, China's largest oil refining company. The storage space is 5.2 million cubic meters says the National Development and Reform Commission. Zhejiang was originally a commercial oil transfer base. Its costal position makes it convenient and at the same time vulnerable to offshore violence. The next reserve of interest In Huangdao or Qingdao, Shangdong Province and the final Dalian, Liaoning Province. All of these reserves are costal and with their creation comes an analysis of how vulnerable they are to Eastern Asian countries possible attacks. These stock piling strategies as well as international acquisition companies are state run companies to combat supply disruption. In 1993 after China became a net importer of oil. It was presented that these stockpiling sites would be filled with domestic oil yet this assumption has not been yet fulfilled these stock piles of acquired oil are attempting to create a reserve for 90 days of oil.

As well as an emphasis on defensive oil stocks, there is a huge push in attempting to create an offensive oil acquisition program an offshore oil drilling rig was approved by all levels of the Chinese government. Liuhua 11-1 is the largest oil field in the South China Sea. Amco and Nanhai East engineering teams experimented with finding an off shore drilling technique, a floating production system that would have drilling and production support. This is the security break through that China would highly value to protect them from market fluctuations and their dependence on imports. The FPSO (floating production, storage and off-loading system) has equipment capable of handling 65,000 bbl of oil and 300,000 bbl of total fluids per day and it would be loaded and shipped by shuttle tankers. Experimental possibilities like drilling in the South China sea exemplify the independent capabilities that China is reaching for its oil production and acquisition projects.

The oil stocks and offshore reserves obviously share one thing in common, their vicinity to the sea this is an asset when one considers the easy of importations and exportations. It is also a weakness because it is exposed to foreign encounters. The Taiwanese security question is exposed, how long could China sustain a cross-straight assault? All three of the stock oil bases are within range of Taiwanese cruse missile attacks thus as the question of oil acquisition is presented the question of energy security follows close behind.

China’s oil output is far lower than its domestic need due to low oil resources. It’s growing economy demands greater and greater amounts of crude oil every year. In 2004, China had to import 100 million tons of crude oil in order to supply its energy demand, more than half of which came from the Middle East. It seems that high oil prices will quell global economic growth in China. This is one of the reasons why it no longer exports oil to Japan who formerly depended heavily on Chinese oil. They had major disagreements on prices and an angry China has decided to cut them off. China is trying desperately to secure its future oil share and establish deals with other countries. Chinese President Hu Jintao has proposed to build a pipeline from Russian oil fields to support China’s markets as well as other billion-dollar arrangements with Russia, Central Asia, and Burma. They have recently purchased less than 1 percent of the British oil company BP, worth about $1.97 billion. As we can see, China is attempting to improve oil relations for the future.

A big role is played in China’s oil endowment by its state owned oil companies, comprising of three major players: China National Offshore Oil Corp, China National Petroleum Corp, and Sino-pec. These companies have decided to invest in exploration and development in countries that have oil fields but do not have funds or technology to develop them. CNOOC signed a deal to extract a million barrels of oil a day in Indonesia as well as other projects with Australia. This will secure that they have a share of that oil in the long run. In addition, an oil reserve that will theoretically fill with 30 days worth of oil has begun construction in China. However, their oil policy on the world oil market has not been completely clear as to how they will deal with the situation as a whole.

In order to obtain oil, China must import from unstable states; another factor China must consider. China’s need for oil may outweigh the costs of importing from a conflict-laden Middle East. China is striving to diversify their energy sector by seeking imports from other regions of the world and by starting programs that will provide energy: such as nuclear. China’s oil endowment is going to be a program that will require an eclectic mix of domestic oil use, imports from all over the world, and development of alternative forms of energy.

References

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