China has become key player in Sudan's oil industry

Apr 26, 2005 02:00 AM

A new oil refinery forms the vital artery of Sudan’s thriving oil industry that poured £ 1 bn into the government last year.
Moreover, the oil that started to flow as recently as 1999 has given President Omar el-Bashir an indispensable international ally.

Almost unnoticed by the outside world, China has become the key player in Sudan's oil industry. Beijing has invested £ 8 bn in Sudanese oil through the China National Petroleum Company (CNPC), a state-owned monolith. The cost of Khartoum's new refinery alone was about £ 350 mm.
Freshly painted billboards in Khartoum carry pictures of smiling Chinese oil workers and the slogan: "CNPC -- Your close friend and faithful partner". But this faithful friend is extremely secretive about its stake in Africa's largest country.
A CNPC spokesman said: "We are a shareholder in a number of operating companies here. We conduct our operations through them. If you want to learn more, you must contact the mines and energy ministry."

Yet CNPC's annual report discloses that about half of all its overseas oil comes from Sudan. It deployed 10,000 Chinese workers to build a 900-mile pipeline, linking Heglig oilfield in Kordofan province with Port Sudan on the Red Sea. The company's report trumpets this achievement as its "first long-distance crude pipeline constructed and operated abroad".
China’s dependency on Sudan’s oil amounts to 7 % of its oil imports, hence Beijing’s efforts to be Sudan’s protector on the international scene. Last September, the United Nations Security Council passed resolution 1564, threatening Sudan with oil sanctions unless it curbed the violence in Darfur. But China immediately rendered this meaningless by pledging to veto any bid to impose an embargo.

"It's very clear that's what is happening," said Georgette Gagnon, the deputy director of the Africa desk at Human Rights Watch. "China is now the largest foreign investor in Sudan so it has an economic interest in ensuring that the Sudanese government is not penalised too harshly. It has been opposed to sanctions from day one."
Beijing needs Sudan because its appetite for oil is insatiable. China's economic boom translates to its oil consumption which is forecast to grow by at least 10 % every year for the foreseeable future. If that trend continues, China's domestic reserves will be depleted in the next two decades.

This the quest for overseas oil is one of Beijing's central goals. Earlier, China signed a "strategic partnership" with Nigeria, a major oil exporter, and it also has oil interests in at least three other African countries. In its scramble for Africa, China portrays itself as a more benign partner than the colonial powers and the modern-day multinational companies.
President Hu Jintao told the Asia-Africa summit in Jakarta: "In pursuit of world peace and common development, China will always stand by, and work through thick and thin, with developing countries."

With the United States having already snapped-up the world's largest reserves in SaudiArabia and Iraq -- who between them have 370 bn barrels therefore 45 % of the world's total -- those markets are effectively closed to China.
Sudan, by contrast, is a no-go area for western oil companies. American investment was officially banned in 1997 and European multinationals steer clear of the avalanche of protest that would accompany any dealings with the Khartoum government, an issue which China has no problems with.
Though Sudan has only 563 mm barrels of proven reserves, the energy ministry estimates that at least 5 bn barrels lie beneath its deserts, a good percentage of which China has a stake in.

Source: Al Jazeera
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