- The Washington Times - Sunday, June 19, 2005

China is forging deals with the world’s major energy players, from Canada to Latin America and Cuba to the Middle East, in an effort to feed its rapidly growing, energy-hungry economy.

But in doing so, it also has engaged some of the world’s most troubled hot spots, such as Iran and Syria.

China is one of the largest importers of Iranian energy, particularly oil and liquefied natural gas. China is also one of the biggest investors in the drilling and exploration sectors of Tehran’s oil industry and is interested in being involved in both offshore and onshore development projects.

“China and Iran are the most important countries in Eastern and Western Asia, respectively, and the Silk Road has linked our two countries together since ancient times. Under the new international situation, we should rebuild the Silk Road and erect a bridge of peace and security for Asia,” said Iran’s ambassador to China, Ferydoun Verdinejad.

Syria also has signed off on a number of oil deals. The two sides signed their first joint venture in July 2004 to develop an old oil field in northeastern Syria.

“The biggest impact on U.S. national interests is China’s willingness to invest in and trade with problem states,” said Christopher Hill, assistant secretary of State for East Asia and the Pacific. “We are concerned that China’s need for energy and other resources could make China an obstacle to United States and international efforts to enforce norms of acceptable behavior.”

China, the world’s most populous country, has surpassed Japan as the second-largest energy consumer behind the United States.

While the United States consumes some 20 million barrels of oil per day, China eats up more than 7 million barrels per day. China produced 175 million tons of oil in 2004 as consumption exceeded 300 million tons.

The country is spending billions of dollars to acquire oil assets abroad as oil imports continue to increase from foreign sources, which supply more than 40 percent of China’s oil.

While Russia has become its fourth-largest supplier of oil, China receives much of its oil supply from the country via rail, which is operating at full capacity and struggling to meet demand.

To transport much of its oil from abroad, China has planned to construct the world’s largest shipyard by 2015. The multibillion-dollar endeavor is expected to create jobs and revenue as well as improve China’s naval capability. China holds 25 percent of the global shipbuilding market, an increase of 5 percent from 2000.

China’s increasing oil demand, meanwhile, is a factor keeping U.S. crude-oil futures near record highs.

“China’s energy needs are going to be enormous in the future,” Mr. Hill said. “The question is, are they looking to develop energy or are they looking to take it off the market?”

Chinese officials are planning to construct a national strategic petroleum reserve and are considering several options for developing a storage facility.

Preliminary work began in early 2004 on four initial storage facilities, according to Chinese news media.

Foreign companies are rushing to invest billions of dollars to construct dozens of LNG import terminals, as well. But Chinese officials are overlooking all the considerations involved in domestic gas projects, experts say.

They argue that local governments are eager to sign off on projects without fully considering all of the aspects involved in an LNG project, such as energy supply, infrastructure construction and gas-market development.

China leads the global industry in technology for coal liquefaction. Some 65 percent of its primary energy consumption comes from coal.

China also plans to construct more than 20 nuclear-power plants by 2020.

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