China's crusade for African oil on the Example of Sudan


Term Paper, 2010
17 Pages, Grade: 1,3

Excerpt

TABLE OF CONTENT

1. Introduction

2. Facts & Figures about Sino-African Oil Relations
2.1. The Institutional Framework of the Chinese Oil Industry
2.2. Statistical Evidence for China’s Foreign Oil Needs
2.3. Trends in the African Oil Industry

3. China & Sudan: A Partnership of Convenience
3.1. A Historical Overview of China’s Ties to Africa and the Sudan
3.2. China’s Modus Operandi in Securing Sudanese Oil
3.3. China’s Justification for its Sudan Policy

4. China’s Future Oil Strategy in Sudan
4.1. Threats for China’s Oil Strategy
4.2. The Two States Scenario

5. Conclusion

Bibliography

Table 1: China’s Oil Sector

Table 2: Africa's Oil Sector

Figure 1: Proven Oil Reserves in Africa

Figure 2: Map of Sudan and its Oil Fields

1. Introduction

Since the formation of the People’s Republic of China in 1949 its political elites have cultivated diplomatic relations with many African countries. Throughout the decades, these diplomatic ties more and more entailed economic activities. When Deng Xiaoping took over the helm of the state at the end of the 1970s, China entered into a still lasting phase of unprecedented economic growth. To further fuel this upsurge, China soon had to start to import certain resources from abroad. By the mid-1990s Beijing finally realized that it would no longer be able to rely exclusively on its domestic oil reserves.

This paper illustrates China’s oil-related activities on the African continent. To provide a clearer picture how the People’s Republic proceeds in securing African oil, I decided to illustrate China’s oil policy in Africa on one specific example. Therefore, I put Sudan in the center of my analysis. Sudan is one of China’s most important oil providers; up to 80 percent of Sudan’s daily oil produce goes to China.1 Nevertheless, political instability, humanitarian crises, and revolting tribes account for a difficult investment environment.

To provide essential background knowledge about the topic, I will first present important facts and figures about China’s and Africa’s oil industry. I will, furthermore, give some perspective of how deeply China is actually invested in the African oil market.

In the third chapter, I will go into the details of China’s and Sudan’s oil diplomacy. Thus, it is important to put their relationship in an historical context. I will, thereafter, explain Beijing’s approach in securing Sudan’s oil reserves and I will shed some light on the question how the Chinese leadership justifies its engagement with a rogue state.

Before I draw a conclusion, I will outline some threats for China’s strategy in Sudan. Next year the southern part of the country may secede from Khartoum. This scenario can be either threat or chance for China’s crusade for African oil.

In this paper, I want to look into the questions, why China chose to go to Sudan considering that there are countries, even in Africa, with much larger proven oil reserves? Are there any drawbacks associated for the Chinese in cooperating with Khartoum? And did China’s strategy in Sudan so far pay off?

2. Facts & Figures about Sino-African Oil Relations

2.1. The Institutional Framework of the Chinese Oil Industry

China’s energy infrastructure has been and will be strongly dependent on oil. Today, the country relies to 40 percent on oil imports, but analysts suggest that this number will climb up to more than 60 percent in the years to come. Given the steady economic growth and the gradual depletion of its domestic reserves and considering the fact that a substitution of oil with more efficient fossil fuels,2 nuclear energy, or even renewables seems to be out of reach in the short run, the People’s Republic will have to tap new sources of oil abroad.3

After realizing, in the mid-1990s, that energy self-sufficiency has been an unrealistic dream, China decided to go abroad and compete in the international energy market. To successfully challenge the market power of the international oil companies that had a head start of 50 years in operating globally, China had to funnel its existing sinews. Therefore, China restructured the preexisting state oil and gas companies into two major enterprises: the China National Petroleum Corporation (CNPC) and the Chinese National Petrochemical Corporation (Sinopec). Both companies produce, import, trade, and process oil, albeit to a different extent. Together with the China National Offshore Oil Corporation (CNOOC), which was already founded in 1982 and, since then, has been concentrating on offshore investments, these three state owned companies form today’s core of the Chinese oil industry.4

Though the Chinese government is the majority shareholder in all three companies, the recent years have shown that CNPC, Sinopec, and CNOOC are not mere puppets in the hands of the political elites. On the one hand, large investments abroad of the national oil companies are often preceded with frequent visits of Chinese diplomats, who usually carry along large funds for infrastructure projects or new presidential palaces. On the other hand, competition between the three companies has tightened in spite of the discomfort of the central government. In 2005, for instance, Sinopec and CNPC bid for the same pipeline project in Sudan and, hence, competed directly against each other. Due to surging profits, their reliance on international banks, and the listings of several subsidiaries on foreign stock exchanges, the national oil companies have gained considerable power vis-à-vis the central government and its agencies. Nevertheless, one should not expect that any of the national oil companies would act directly against the will of the political leadership.5

2.2. Statistical Evidence for China’s Foreign Oil Needs

“Developing nations, including population giants China and India, are entering their most energy-intensive phase of economic growth as they industrialise, build infrastructure, and increase their use of transportation.”6

25 years ago, the People’s Republic of China was East Asia’s largest oil exporter. This has changed dramatically. China has shifted from being an oil exporter to being the world’s second largest importer of oil.7 The figures of the table below underline this fact. The proven reserves of oil in China have declined slightly in the last decade while the total consumption increased by over 80 percent. Today, more than ten percent of the oil consumed in the world is consumed in China. Considering that the per capita oil consumption in China still lacks far behind the consumption in the western hemisphere and that China makes up about 20 percent of the world population, this ratio is likely to increase beyond 10.4 percent.8

illustration not visible in this excerpt

Table: China’s Oil Sector9

Foreign resources in general and oil in specific are necessary to fuel China’s ongoing economic growth, which has averaged on an annual increase in GDP of nine percent over the last three decades. This continuing growth is not just important to lift more and more people out of poverty, but also to prevent social unrest and, therefore, to solidify the sole leadership of the Chinese Communist Party. The African continent has become an important partner for the People’s Republic and the Communist Party to achieve these goals.10

2.3. Trends in the African Oil Industry

The distribution of the world wide proven oil reserves is, not surprisingly, in favor of the Middle East. More than half of the total reserves are situated in that region. Nevertheless, Africa also has considerable stakes in the game. In 1990, 5.9 percent of the proven oil reserves were located in Africa; this percentage has risen to 9.6 percent in 2009. The growth in this number indicates why Africa might become even more attractive for international oil companies as it is today. Africa has the largest potential in discovering undetected oil reserves; it is one of the few regions in the world where large oil fields may still be hidden.11

illustration not visible in this excerpt

Table 1: Africa's Oil Sector12

Within Africa, Libya and Nigeria have the largest reserves on hand and make up about two thirds of Africa’s total reserves; third and fourth place take Algeria and Angola with roughly ten percent each. Sudan is on fifth place with a share of approximately five percent. However, the country can present a strongly growing oil production throughout the last decade.13

illustration not visible in this excerpt

Figure 1: Proven Oil Reserves in Africa14

With the exception of Sudan, where the oil sector is dominated by Chinese national oil companies, especially by CNPC, China remains a relative minor player in the African oil market. Among foreign oil companies, the commercial value of oil investments of China’s oil companies amount to only eight percent; if we include African companies in the equation it amounts to only three percent.15

[...]


1 Engdahl, 2007

2 Aside from oil, China is mainly relying on coal-fired energy production (it has the world’s third largest reserves), but very little on natural gas. Cf. BP p.l.c., 2010 pp. 27-29; Lee, et al., 2008 pp. 114-115

3 Zweig, et al., 2005 p. 36

4 Lee, et al., 2008 pp. 113-114; Sieren, 2008 p. 16

5 Rotberg, 2008 pp. 4-5; Downs, 2007 pp. 48-51

6 Shell International BV, 2008 p. 8

7 Zweig, et al., 2005 p. 25

8 BP p.l.c., 2010 pp. 6-15

9 BP p.l.c., 2010 pp. 6, 12

10 Friedberg, 2006 p. 34; Zweig, et al., 2005 pp. 25-26

11 Between 2001 and 2004, 85 percent of the world’s newly found oil reserves were located in West and Central Africa. The proven reserves in Africa increased by 56 percent between 1996 and 2006. In comparison, in the rest of the world the reserves increased by only 12 percent in the same period of time. Raine, 2009 p. 38; Downs, 2007 p. 45; BP p.l.c., 2010 pp. 6-7

12 BP p.l.c., 2010 pp. 6, 8

13 Downs, 2007 pp. 43-45

14 Downs, 2007 p. 43

15 Trinh, et al., 2006; Downs, 2007 p. 44

Excerpt out of 17 pages

Details

Title
China's crusade for African oil on the Example of Sudan
College
University of Hamburg  (Sozialökonomie)
Grade
1,3
Author
Year
2010
Pages
17
Catalog Number
V181809
ISBN (eBook)
9783656050360
ISBN (Book)
9783656050599
File size
661 KB
Language
English
Notes
Tags
China, Sudan, Oil, Africa
Quote paper
M.A. Gregor Sahler (Author), 2010, China's crusade for African oil on the Example of Sudan, Munich, GRIN Verlag, https://www.grin.com/document/181809

Comments

  • No comments yet.
Read the ebook
Title: China's crusade for African oil on the Example of Sudan


Upload papers

Your term paper / thesis:

- Publication as eBook and book
- High royalties for the sales
- Completely free - with ISBN
- It only takes five minutes
- Every paper finds readers

Publish now - it's free