-Caveat Lector- http://www.newsmax.com/archives/articles/2002/7/1/174627.shtml
Chinese-Russian Cooperation in Oil and Gas at a New Level Dr. Alexandr Nemets and Dr. Thomas Torda Tuesday, July 2, 2002 The newly expanded - in mid-June 2002 - Chinese-Russian alliance provides China with excellent opportunities for strengthening positions in the eastern regions of Russia. In particular, huge energy projects are on the way. Energy Projects September 2001-March 2002 In 2000, Chinese crude oil and oil products imported from Russia increased greatly, to 2.5 million tons, from 1999 levels of 1.5 million tons, which had in turn increased from 1998 levels. According to preliminary data, in 2001 Chinese crude oil imports from Russia approached 2.5 million tons - despite some temporary decline in China's overall imports - while oil products imported surpassed 3 million tons; these are official figures, not including many hundreds of thousands of tons of "unregistered export" of oil and oil products. These are, however, only the "first oil drops" from the mighty Oil River to be directed from Siberia and the Russian Far East to China. Up to the present moment, all the crude oil comes to China from Russia by railway - through the Zabaikalsk-Manzhouli border oil-reloading terminal on the Chita-Harbin-Vladivostok railroad. Oil products come the same way or via the sea, from Russian Pacific Ocean ports. Russian railway capacities became the major bottleneck for this trade. However, in early September 2001, during the visit of Chinese Premier Zhu Rongji to Moscow, China and Russia - after several years of intensive negotiations - signed an agreement to lay a 2,400-km oil pipeline between Angarsk city in the Irkutsk region of Eastern Siberia and Daqing city, the "oil capital of China," in Heilongjiang province in China's northeast, to annually transport 25-30 million tons of oil to China beginning in 2005. This was merely the beginning of serious Chinese penetration - probably "expansion" would be a more correct word - into the oil and gas deposits of Siberia and the Russian Far East. According to the following report, the next step - or leap forward - took place just two weeks later (Xinhua, Harbin, Sept. 27, 2001, very briefly; comments in parentheses): China and Russia have signed their first-ever agreement to jointly explore and develop oil resources in Russia's East Siberia. Leading geologists in the Daqing Oil Field Corp. stated that two neighboring countries will co-develop oil fields in the Irkutsk-Sakha region of Siberia (more precisely, oil and gas basins in (a) the northern part of Irkutsk region, belonging to East Siberia and (b) the western part of Sakha-Yakutia republic, belonging to the Russian Far East). Russian oil giants ROSNEFT and UKOS will be partners with Daqing, they said. It is believed that Siberia has oil reserves of up to 11.5 billion tons (this doesn't take into account almost unexplored reserves of the Russian Far East). Daqing will provide technology and funding to its Russian partners for the project, estimated to cost over $10 billion. The proposed oil fields would be located 1,000-1,500 km from the China-Russia border. According to sources from Russia, only a small proportion of oil reserves has been found in East Siberia and the Russian Far East, which is limited by technology and funds from further exploration. In a related development, China National Petroleum Corporation (CNPC), Daqing's parent company, has talked with the government of the Sakha-Yakutia republic about jointly developing another two oil fields in the Irkutsk-Sakha oil-bearing areas. By 2010, Chinese imports of oil from Russia will increase tremendously. (end of report) Much was done in October 2001-March 2002 toward accomplishing the signed agreements. The Russian side fulfilled most of the oil pipeline feasibility study and pipeline design. Some initial work on the pipeline started, for example, in the Buryatia Republic (to the east of Lake Baikal), the government of which does its best for pipeline construction. The Russian government even initiated negotiations with Mongolia, though the pipeline obviously won't pass through this country. According to ITAR-TASS agency, on March 25, 2002, Russian Prime Minister Mikhail Kasyanov in Ulan-Baatar discussed an oil pipeline project during talks with his Mongolian counterpart, Nambaryn Enhbayar. Kasyanov said after the talks that Russia was discussing with China two options, one of which was an oil pipeline that would traverse Mongolia. A feasibility study, which is under way, is to show which of the two projects is more cost effective. (end of report) Probably Russia will construct two oil pipelines to China: from Angarsk to Daqing, without passing Mongolia - by 2005; from Angarsk through Mongolia to Northern China - most probably to Beijing - after 2005. By 2010, exports of oil through both pipelines could reach 50-60 million tons. April-May 2002: Work on Energy Projects Accelerates On April 22, in Beijing, Russia's Deputy Prime Minister Viktor Khristenko and Chinese officials discussed a $20 billion project for an East-West gas pipeline, in which Russian gas monopoly Gazprom is a participant; this company has much experience in accomplishing similar projects. The pipeline is due to link, by 2005-2006, the Tarim gas fields in the Xinjiang Region of western China to the Shanghai industrialized area. This project is destined to become the backbone of a national gas pipeline system in the future. It was decided to have several more meetings on this project's details in June-August 2002. Remarkably, Gazprom is seriously considering a project for laying a major gas pipeline from Yamal peninsula (Gazprom gas deposits), in the northern part of Western Siberia, to China's Xinjiang; this will open the Chinese natural gas market for Gazprom. Moscow-based Izvestiya newspaper published on May 8, 2002, the article "Maritime Region Oil Fever" describing one more serious project (briefly summarized here): The Maritime region (Primorye, centered in Vladivostok city) administration and leaders of neighboring Chinese provinces of Heilongjiang and Jilin have signed a plan for joint work on geological research into reserves of oil and gas. Russian specialists estimate that reserves of oil in the Maritime region total between 100 and 400 million tons, while Chinese geologists put these reserves at 1.2 billion tons. Russian specialists, based on local geophysical studies of the 1930s-1960s, are confident that there are major reserves of oil and gas in the Maritime region in three sectors: the sector between the cities of Ussuriysk and Artem in Suifen River Basin, which contains approximately 15 million tons of oil and several billion cubic meters of gas; the sector in the Lake Khanka plain, with approximately 35 million tons of oil and tens of billions of cubic meters of gas; and the sector around Luchegorsk town, with approximately 50 million tons of oil. As representatives of the Chinese Daqing Oil Corp. (mentioned above, subordinated to CNPC) reported after the talks in the Maritime region, they have spent 80 million rubles on prospecting and are already extracting oil in the border oilfield from depths of 1,800 to 2,850 meters (on Chinese territory). Now is the time to move oil prospecting into the Maritime region. In the signed documents, the Chinese side insists that each side carry out prospecting on its own territory at its own expense. According to the new agreement, "both sides will carry out staged geological research operations on territory extending for 200 km on both sides of the border, taking in promising oil and gas regions." Russian geologists estimate that it will cost 50-60 million rubles and take 2-3 years to make a detailed assessment of the deposits. By 2005, the Maritime region could be putting out its first oil. The export of petroleum products will increase revenue to the region's treasury. (end of article brief ) In short, Daqing Oil Corp. will supervise oil exploration and production in the Maritime region; most of this oil - probably, up to 2-3 million tons annually by 2010 - will go to China. Almost the same day, on May 9, the authoritative Beijing Review magazine published an article written by Qin Xuanren, a professor at Beijing-based University of International Business and Economics: "Opening an Express Lane for Chinese-Russian Trade Relations." One excerpt of the article is of especial importance: In 2000, China imported 70 million tons of crude oil (and 20 million tons of oil products) worth $20 billion. If China had spent half of this money on oil imports from Russia instead, it would have been a cheaper, faster and safer process. Russia would have also been satisfied. Given this, China and Russia signed an oil pipeline contract last September. More oil and gas pipelines will be built and put into use several years later. This contract ... would greatly increase the trade volume between the two countries from the current $10 billion. China and Russia will upgrade their current trade level to match their political and military relations, strategic partnerships and their positions as big powers. (end of excerpt) An additional report of significant importance is as follows. (ITAR-TASS agency, Harbin (capital of Heilongjiang province), June 15, 2002) (briefly) - Chinese State Council member Wu Yi and the head of CNPC Ma Fucai met Russian Deputy Prime Minister Viktor Khristenko on June 15 to discuss major cooperation projects between the two countries in the fuel and energy sector. At first, they discussed the construction of an oil pipeline (Angarsk-Daqing) to northeast China and a gas pipeline to Northern China. The talks also involved senior officials from the Russian gas-holding Gazprom, the oil company Yukos, interested ministries and agencies. After the talks, Khristenko stated that the focus was mainly on the implementation of the (aforementioned) West-East Gas Project in China, with the participation of Gazprom. He stressed that Russia and China were interested in the development of the Chinese gas sector. To this end, the two countries will set up a joint venture to develop the Chinese gas market. Prospects for cooperation in the gas sector "generated proposals on strategic partnership between Gazprom and CNPC." The sides also discussed interaction in the oil sector. A feasibility study for a Russia-China oil pipeline should be finished in July 2002. The 2,400-km-long pipeline will cost about $2 billion. The results of this work will be discussed at a meeting of the bilateral sub-commission on energy at the end of July. The sides also touched upon the steadiness of Russian oil supplies to China through railway border checkpoints. (end of report) Some Preliminary Conclusions According to reliable estimates of the authors, by 2010 China will have to import at least 200 million tons of oil (crude oil plus oil products recalculated into crude oil) and 100 billion cubic meters of natural gas (including liquid natural gas (LNG) and liquefied petroleum gas (LPG)). China's leaders intend to get the major share of this supply from Russia and spare no efforts to promote Chinese-Russian projects in this area. The Russian side responds obediently. CNPC-subordinated Daqing Oil Corp. plays the decisive role in most of the projects. This company, based in Daqing city (some 200 km northwest of Harbin), monopolizes oil production in Heilongjiang province; the company produces 52-54 million tons of oil annually, has several hundred thousand qualified employees and workers, much advanced equipment, etc. However, local oil deposits are exhausted, and the company desires to expand its "sphere of influence" to all of East Siberia and the Russian Far East. Let's list now the specific projects (besides the aforementioned Gazprom projects): Oil deposit exploration and development in the Maritime region by Daqing Oil Corp. (nothing can be added to the report above). The Angarsk-Daqing pipeline, to be put in service in 2004-2005 and transport up to 30 million tons of oil to China annually. This pipeline has the route Angarsk (Irkutsk region) - Irkutsk - bottom of Lake Baikal - Ulan-Ude city (capital of Buryatia Republic) - Chita city - Manzhouli city on the Chinese-Russian border - Daqing. This pipeline will use oil from Western Siberia's southeastern Tomsk region (where deposits are controlled by Yukos corp.) and newly discovered basins in the Krasnoyarsk region and the Irkutsk region of Eastern Siberia. No serious problems await this project. The Daqing Oil Corp. plays a major role here. The Angarsk-Northern China oil pipeline. This pipeline, presently under discussion, would go through Mongolia at least to Beijing. The gas pipeline Kovykta (northern part of Irkutsk region)-Yellow Sea. This pipeline should transport - through Irkutsk, Lake Baikal, Ulan-Ude, Mongolia to Beijing and the Yellow Sea coast - up to 30 billion cubic meters annually from the Irkutsk region and the adjacent part of Sakha-Yakutia Republic to China and, probably, to South Korea. The agreement on pipeline construction could be signed before the end of 2002. The oil pipeline and gas pipeline from Sakha-Yakutia Republic to Daqing. The projects are under intensive discussion and could be signed by mid-2003. Again, Daqing Oil Corp. is the main player on the Chinese side. The participation of Daqing Oil Corp., CNPC and other Chinese oil enterprises in exploration of oil and gas deposits of the Khabarovsk region (to the north of the Maritime region), the Sakhalin island shelf, and the Sea of Okhotsk. This is the only project among the listed ones meeting the resistance of the Russian side, more exactly, local authorities. For how long, however, can they resist? Realization of the listed projects will effectively transform most of Siberia and the Russian Far East into the "raw materials supplier of China," providing the Middle Kingdom - for cheap prices and in huge quantities - with hydrocarbons and other raw materials of all kinds. Dr. Alexandr V. Nemets is co-author of "Chinese-Russian Military Relations, Fate of Taiwan and New Geopolitics." Dr. Thomas J. Torda has been a Chinese linguist specializing in science and technology with FBIS, and a Chinese/Russian defense technology consultant with the Office of Naval Intelligence. You may contact Dr. Torda at [EMAIL PROTECTED] <A HREF="http://www.ctrl.org/";>www.ctrl.org</A> DECLARATION & DISCLAIMER ========== CTRL is a discussion & informational exchange list. Proselytizing propagandic screeds are unwelcomed. Substance�not soap-boxing�please! These are sordid matters and 'conspiracy theory'�with its many half-truths, mis- directions and outright frauds�is used politically by different groups with major and minor effects spread throughout the spectrum of time and thought. That being said, CTRLgives no endorsement to the validity of posts, and always suggests to readers; be wary of what you read. CTRL gives no credence to Holocaust denial and nazi's need not apply. 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