China's growing presence in petro-politics

Over the past week, not only has China been in headlines concerning the Middle East, but also in energy news in three different regions. Here's the roundup.

In Iraq, Baghdad is seeking a long-term agreement with Beijing regarding oil deliveries. The Jamestown Foundation's China Brief came out with an article analyzing the flourishing China-Iraq relationship and the potential difficulties this may pose to regional players and China itself. The brief runs through some key points in the petro-relationship.

  • 2008 - CNPC concludes $3.5 billion deal with Iraq's North Oil Company
  • 2009 - CNPC and BP sign agreement with Iraq to increase Rumalia oil field's production
  • 2009 - PetroChina agrees to operate Halfaya oil field
  • 2010 - CNOOC and Turkish Petroleum Corporation agreed to develop Missan oil field's upstream capacity

The report also touches on issues China might face in the future in the region as a result of their oil deals with Iraq. Of strategic importance are regional fears of an Iraq-Iran alliance, the United States withdrawal from Iraq and thereby a removal of security guarantees, and relations with the Kurdish Regional Government in Iraq.

In southeast Asia, Myanmar's crude oil pipeline, scheduled to go live September, hit the Wall Street Journal's Southeast Asia Real Time blog. This pipeline connects Myanmar's coast to Yunnan, which allows China to place less reliance on the Straits of Malacca. This contributes to popular "string of pearls" narrative whereby China is seeking to cultivate regional relationships to avoid the potential choke point at the American-controlled Straits. Once the pipeline begins operations, the amount of China's oil transported through the Straits falls from 37 percent of total demand to 30 percent.

Lastly, Mongolia announced mid-March that Mongolia will begin an exchange program whereby crude oil from Mongolia is traded for downstream oil products from Inner Mongolia Autonomous Region. PetroChina and Sinopec operate all three of Mongolia's producing fields. Naturally Mongolian policymakers are concerned about a heavy reliance on China.

NewsKendrick Kuo