CNPC studies best route to ship African oil home
Friday, November 03, 2006
China's thirst for foreign crude is driving its biggest oil company to examine several pipeline projects in northern and western Africa, said the chief executive of China National Petroleum Corp's exploration partner in Niger.
A strategy of offering soft loans and aid to poor nations has enabled China to muscle past Western rivals in the race for some of Africa's energy assets, but it has yet to work out the best way to move some of its equity oil back home.
To get its African oil on to tankers for the long haul to eastern Asia, China is considering which of three different pipeline projects to go ahead with.
One could link Sudan with Chad and Niger, another might go north through to Algeria's Mediterranean ports or a third option could be a link between Niger and Nigeria, as part of a Niger- Nigeria oil swap deal, according to Clifford James of Canada's TG World Energy.
The issue is pressing as China's oil imports are rising each year and domestic production cannot keep up.
Its oil imports hit a record high for any month of 3.29 million barrels per day in September.
At the same time, CNPC has kicked off drilling programs in Mauritania and Niger in recent weeks as it seeks to build on oil strikes in Chad and Sudan.
TG World is the junior partner of the CNPC-led Tenere concession in Niger with a 20 percent interest. It estimates there could be as many as 500 million barrels of crude beneath the sands there.
James was speaking as dozens of African leaders and delegations arrived in Beijing for a three-day summit to cement diplomatic and trade ties.
China's aggressive expansion in Africa has worried Western countries, which rely on light grades of crude for their refineries similar to oil produced in many parts of Africa where the Chinese have interests.
Also, independent oil companies that must answer to shareholders feel they struggle to compete with government-to-government deals favored by the Chinese.
Plans by CNPC to examine investments that bypass Western-built oil infrastructure are likely to exacerbate those concerns, although the Chinese have defended their actions in Africa as improving local living standards and opening up oil reserves that would otherwise have remained hidden for some time to come.
A typical tactic adopted by the Chinese is to plow money into non-oil infrastructure such as mobile phone networks or roads and later secure preferential treatment in auctions of oil blocks, often by getting the right of first refusal to match the top bid tabled by their competitors.
"One can look at it from a Machiavellian standpoint and say there's some method in their madness in the sense that what they are trying to do is get some leverage on those countries," James said.
"They do that by loaning money so that they can get into a position to use that leverage to get into some of the energy deals. That's quite different from the Western way."
US giant Exxon Mobil leads a consortium that invested US$3.5 billion (HK$27.3 billion) in a 225,000 bpd- pipeline and export facilities from Chad to Cameroon which would be most affected by competing installations built by the Chinese.
Exxon Mobil was embroiled in a row with the government of Chad this summer over unpaid taxes that saw it ordered to leave the country at one stage. This took place just three weeks after China and Chad established diplomatic relations.
One alternative to a Sudan-West Africa pipeline, James said, was CNPC looking at a crude-swap deal that would see oil pumped in Niger transported by a pipeline that it wants to build to a remote refinery in the northern part of neighboring Nigeria.
In May, CNPC agreed to invest US$2 billion in the Kaduna refinery in Nigeria after winning four blocks in a mini-bid round.
The 110,000-bpd facility has suffered fire damage and the Chinese side has not only pledged to refurbish it, but make it bigger as well, James said.
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