TRIN-GYI-PHO-NYA: TIBET’S ENVIRONMENT AND DEVELOPMENT DIGEST – September 2006
By Khyunglho Tsetan Dolkar
Khyunglho Tsetan is a Ph.D. candidate in the Political Science department at Phillips University, Marburg, Germany. Her research focus is on Sino-Tibet relationship in the last decade of the 20th century.
Special to TRIN-GYI-PHO-NYA
Recent huge leaps in China’s economic and industrial growth have made China the world’s second leading oil importing country after Japan and the second largest oil consumer in the world. Propelled as a major player in the international oil market, China’s skyrocketing growth in its economic sectors has led to a widening gap between its domestic oil production and consumption. In 1993, China for the first time became a net oil-importing country, ending its “energy self-reliance” phase. By the turn of the century China’s oil imports had almost doubled in one year, rising from 36.6 million tons in 1999 to 70.2 million tons in year 2000.(1) According to World Energy Outlook 2004 China alone accounted for almost one third of the rise in global oil demand in 2003.(2) The International Energy Agency’s statistics show that China’s oil imports will rise dramatically to 400 million tons a year by 2020, with the potential to rise further.(3) China’s ever-increasing thirst for energy and its heavy reliance on foreign oil imports impose serious threats to international oil security and warrant global considerations. This paper will show the new strategies that China is adopting to overcome domestic oil shortages and how the country’s unexplored western regions are becoming prime targets of China’s oil policies.
A retrospective look at China’s oil industry exhibits that prior to its economic reform in 1978, China had maintained self-sufficiency with its major oil fields, such as Daqing (discovered in 1960), Shengli (1962), Renqiu (1975) and Liaohe (1967). However, as the nation’s demand surged, Daqing, China’s largest oil field reached a stagnation phase in the late 1970s(4) and the total output of the other three oil fields has failed to exceed Daqing’s peak output, which accounted for half of the nation’s total oil production in 1976.(5) The decline of onshore production impelled China to focus on its more promising offshore reserves. China National Offshore Oil Corporation (CNOOC), in conjunction with foreign oil companies, started aggressive oil exploration in the Bohai Gulf near Tianjin in 1970s and in the South China Sea near Canton in the late 1970s. The exploration in the Bohai Gulf led to the discovery of two productive oilfields; Haisi and Chengbai oilfields. Despite joint ventures with foreign oil companies such as the Japan National Oil Corporation (JNOC) and the Societe’ National Elf Aquitaine of France the yield remained relatively small in the Bohai Gulf. The crude oil production from the South China Sea was estimated to peak at about 100,000 b/d, a respectable output but far short of initial hopes.(6)
A host of problems has hindered the rapid development of China’s oil industry. For instance in the onshore fields excessive extraction of oil, adopting Soviet methods, and a lack of sophisticated technology limited the increase in Daqing’s production. Furthermore, complicated geological structures in Shengli and other fields had also hampered the output. In addition the wastefulness of the whole extraction and transportation process aggravated the inadequacies of onshore production. As for offshore productivity, despite occasional significant discoveries and international involvement, China’s limited technological prowess, particularly at deep sea drilling, impeded the growth of those oil reserves. The combination of the shortage in domestic oil supply with the burgeoning industries and manufacturing sectors of China’s booming economy elevated its dependency on foreign imported oil. Furthermore, limitation in coal use, the primary source of energy for China, due to environmental policies exacerbated the growing reliance on oil and gas. The weak energy transportation infrastructure such as inadequate oil pipelines, which couldn’t keep pace with the nation’s overwhelming demand, further constrained the expansion of China’s oil industry.
To minimize the widening supply-demand curve and increasing dependency on imported oil China embarked on new strategies in their Tenth Five Year Plan, which states:
Energy, oil in particular, is of strategic importance. Domestic development and production of oil can no longer keep pace with the needs of the country’s economic and social development, resulting in an increasing imbalance between oil supply and demand. Therefore, we need to take all possible measures to conserve oil, accelerate exploration and exploitation of oil and natural gas resources, and make effective use of overseas resources.
In implementing the plans China targeted its western regions particularly Tarim and Karamay Basins in Xinjiang Autonomous Region and Tsaidam Basin in Qinghai, north-eastern Tibet. Although the oil reserves in these regions were known to the Chinese government from early 1950s, the expensive nature of the projects dissuaded leaders from developing them. However the urgency of the need has compelled China once again to place high priority on the development of these basins, hence the “West to East Gas Transfer” project was launched.
The history of these oilfields started several decades ago when Karamay and Tsaidam were discovered in the 1950s, and Tarim in 1970s. At the time experts believed that the three oilfields contain huge amount of reserves and would help China reduce its reliance on imported oil. According to Soviet and Chinese geologists, Karamay contained approximately 60 percent of Mainland China’s oil reserves and Tsaidam was once believed by the Chinese geologists as the most promising oilfield. The West to East Gas Transfer project focused on the construction of pipelines to transport natural gas from Xinjiang to Shanghai City and Sebei in the Tsaidam Basin to Lanzhau, capital of Gansu Province. The construction of 953 kilometer Sebei-Xining-Lanzhou gas transmission pipeline began on 30 March 2000 at the cost of $302 million. The pipeline is designed to transfer two billion cubic meters of gas annually. On July 4, 2002 China kicked off another multibillion dollar natural gas transmission project, a 4,200 kilometer pipeline which starts from Lunnan oilfield in southern Xinjiang and snakes through the provinces of Gansu, Shaanxi, Shanxi, Henan, Anhui, Jiangsu and the Ningxia Hui Autonomous Region, ending in Shanghai and Zhejiang province.(7)
Heavy explorations of oil and gas deposits in Tibet and other western regions continue to persist. In a report carried by Xinhuanet, in 2001 Chinese scientists had claimed of a 180 million year old oil belt discovery in Changthang Basin, northern Tibet. The team predicted that the reserves in the ancient belt hold up to 5.4 billion tons with enormous large oil and gas basins. The prediction indicates that the government may intensify exploration and extraction in Tibet for years to come. Furthermore, the recent implementation of the Eleventh Five Year Plan (2006-2010) outlines Beijing’s intentions to pursue their plans to further exploit the energy resources in Tibet. China’s National Petroleum Corporation (CNPC) explicitly avers in its five year plan to increase the production capacity of Qinghai Oil Field to 6.5 – 7 billion cubic meters and reinforce oil-gas exploration in Tsaidam Basin.(8) England’s The Guardian on May 30, 2006 reported that PetroChina, while inviting foreign participation had drilled its first complete well at Changthang and has plans to drill ten more in three years.(9)
All these measures employed by the CCP highlight how China will continue targeting Tibet and other western regions to slake their thirst for oil. So long as the global oil production stagnates and China’s demand climbs at the present rate and its supply engines splutter, exploitation of China’s western regions will be a focal point in its energy policy.
References:
1 Zha Daojiong, ‘China’s Energy Security and Its International Relations’, The China and Eurasia Forum Quarterly, Vol. 3, No. 3, Central Asia-Caucasus & Silk Road Studies Program, November 2005.
2 World Energy Outlook 2004, OECD/IEA, November 9, 2004.
3 China’s Worldwide Quest for Energy Security, IEA, 2000.
4 Cheng, Chu-Yuan, The Demand and Supply of Primary Energy in Mainland China, Chung-Hua Institution for Economic Research, Taipei, Taiwan, 1984.
5 Vaclav Smil, Energy in China’s Modernization: Advances and Limitations, An East Gate Book, M. E. Sharpe, Inc. 1998.
6 Haijiang Henry Wang, China’s Oil Industry and Market, Elsevier Science Ltd, New York, 1999.
7 ‘Massive Pipeline project underway in China’, Asia Times, July 6, 2002.
8 ‘Qinghai to Build a Ten Million Ton Oil & Gas Field’, Sinocast, June12, 2006.
9 ‘China invites oil firms to join invasion of Tibet’, The Guardian, May 30, 2006.
Abridged from the original.
