US raises concern over China oil policy

Posted on January 21, 2010

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The headline is taken from an article in Upstreamonline.com with the subheading, “The US has expressed concern to Chinese officials about Beijing’s attempts to buy up global oil reserves for the long term”. Reading further:

“We are pursuing intensive dialogue with the Chinese on the subject of energy security, in which we have raised our concerns about Chinese efforts to lock up oil reserves with long-term contracts,” David Shear, deputy assistant secretary of state for East Asian and Pacific affairs, told the House Armed Services Committee yesterday.

“We will continue to engage them on this subject at very senior levels,” he told the panel, which was holding a hearing on recent security developments in China.

Shear was responding to questions by Republican Roscoe Bartlett, who said he was worried that the Chinese were “aggressively buying up oil all over the world” and might not share it with other countries in the future.”

It is justifiable to say that Member of the House of Representatives Roscoe Bartlett is “Peak Oil’s man on Capitol Hill” in Washington. I met him for the first time in 2005 when I was summoned to testify at a hearing in the House of Representatives on Peak Oil. (Read about it at ASPO’s website.) We met again in March 2008 when I was in Washington having been invited to a conference on “America’s Energy Future”. (Read about that visit.) When I visited Congressman Bartlett I was invited to the House of Representatives to listen to his 40th contribution on Peak Oil. I felt very honoured when he, (according to protocol), stated the following:

”Well, this is a very special day for me today because I have a very good friend, Kjell Aleklett. He is from the Uppsala University in Sweden, and he is the president of ASPO, the Association for the Study of Peak Oil & Gas. They have been around for a long time, and if the world had been listening to them, we would not have $110 oil today. And I think you will agree with me as we go through the charts, that would be correct. He sits in the gallery, and thank you, sir, very much for joining us.”

Let’s return to China and its oil policy. In the autumn of 2007 Professor Pang from China University of Petroleum in Beijing (CUPB) was invited to be the keynote speaker at the ASPO conference in Cork, Ireland. On the way there, he and the Chinese delegation stopped over in Uppsala for a mini-workshop. One of the items of news that he delivered was that China had adopted a new oil policy whereby they would aim to control oil production equivalent to 50% of the nation’s needs. At that time in 2007 China produced approximately 50% of its needs. However, China’s enormous economic growth required more production than it could deliver domestically so that today 50% control means they are forced to buy production rights outside of China. What we are now seeing is China consciously applying its oil policy.

Since the start of 2008, CUBP and Uppsala University have had a collaboration agreement that gives us unique research opportunities. The first scientific article to result from this has now been accepted for publication, ”The Long March of the Chinese Giant Oilfields”.

Abstract: Over 70% of China’s domestic oil production is obtained from nine giant oilfields. Understanding the behaviour of these fields is essential to both domestic oil production and future Chinese oil imports. This study utilizes decline curves and depletion rate analysis to create some future production outlooks for the Chinese giants. Based on our study, we can only conclude that China’s future domestic oil production faces a significant challenge caused by maturing and declining giant fields. Evidence also indicates that the extensive use of water flooding and enhanced oil recovery methods may be masking increasing scarcity and may result in even steeper future decline rates than the ones currently being seen. Our results suggest that a considerable drop in oil production from the Chinese giants can be expected over the next decades.

Small oilfields in China constitute 30% of production and the trend is for continued increased production from these. However, in a few years the production declines in the giant fields will be so great that total Chinese production will decline. In coming years we will experience aggressive bidding from China whenever any oil production rights are offered for sale. The next step is for China to build new refineries in collaboration with major oil producing nations such as Saudi Arabia. When Peak Oil affects the world these refineries will, naturally, be first in the queue for Saudi oil. For the sake of its own survival, the OECD must take Peak Oil seriously and plan for its future energy needs post-Peak Oil.

Some years ago I saw a documentary on Walmart’s aggressive purchasing policy. In the USA, factory after factory was forced to close because they could not compete with the manufacturers in China. In the end, even the USA’s last factory for production of TV sets closed down. At the end of the documentary it took us to the harbour in Los Angeles where we saw all the container ships arriving with all the goods from China. The harbour master was asked about exports from the USA to China. The reporter suggested possibly some type of high technology export but the largest export was something completely different.

The largest export was waste paper that was imported by China for manufacturing of boxes which, in their turn, were exported back to the USA containing Chinese-made goods. Sometimes when I am in the right mood I say during my presentations that “China has Walmart to thank for its fantastic growth”. That growth has transformed China into a wealthy nation that can now afford to pay more than anyone else for the world’s remaining oil production rights. Indirectly, one can assert that Walmart has, through its aggressive purchasing policy, driven the development that has now made it possible for China to take the last drops of oil for itself. The fact that there is insufficient oil for continued global growth can mean that we, in addition to Peak Oil, will see “Peak Globalisation”.

(Swedish)

Rubriken är tagen från en artikel i Upstreamsonline.com med underrubriken ” The US has expressed concern to Chinese officials about Beijing’s attempts to buy up global oil reserves for the long term”, låt oss läsa vidare:

“We are pursuing intensive dialogue with the Chinese on the subject of energy security, in which we have raised our concerns about Chinese efforts to lock up oil reserves with long-term contracts,” David Shear, deputy assistant secretary of state for East Asian and Pacific affairs, told the House Armed Services Committee yesterday.

“We will continue to engage them on this subject at very senior levels,” he told the panel, which was holding a hearing on recent security developments in China.

Shear was responding to questions by Republican Roscoe Bartlett, who said he was worried that the Chinese were “aggressively buying up oil all over the world” and might not share it with other countries in the future.”

Med rätta kan man påstå att representanthusledamoten Roscoe Bartlett är Peak Oils man på Capital Hill i Washington. Jag träffade honom första gången 2005 då jag själv var inkallad till ett utskottsförhör i Representanthuset om Peak Oil (läs på ASPOs hemsida) och en andra gång i mars 2008 då jag var i Washington inbjuden till en konferens om ”America’s Energy Future”. (Läs om besöket) Då jag besökte Kongressman Bartlett blev jag inbjuden till representanthuset för att lyssna till hans 40:e inlägg om Peak Oil. Jag kände mig hedrad då han enligt protokollet framförde följande:

”Well, this is a very special day for me today because I have a very good friend, Kjell Aleklett. He is from the Uppsala University in Sweden, and he is the president of ASPO, the Association for the Study of Peak Oil&Gas. They have been around for a long time, and if the world had been listening to them, we would not have $110 oil today. And I think you will agree with me as we go through the charts, that would be correct. He sits in the gallery, and thank you, sir, very much for joining us.”

Låt oss gå tillbaka till Kina och deras oljepolitik. Hösten 2007 var professor Pang från China University of Petroleum in Beijing (CUPB) inbjuden som en av huvudtalarna vid ASPO – konferensen i Cork, Irland. På väg dit stannade han och den Kinesiska delegationen i Uppsala för en minworkshop. En av nyheterna som han levererade var att Kina anammat en ny oljepolitik, som gick ut på att man skulle kontrollera en oljeproduktion som motsvarade 50% av landets behov. Då 2007 producerade Kina ungefär 50% av sitt behov inom landets gränser, men den enorma ekonomiska tillväxten krävde mer än vad produktionen i Kina kunde leverera så idag medför 50 procents kontroll att man tvingas köpa produktionsrättigheter utanför Kina. Vad vi nu ser är att Kina medvetet genomför sin politik.

Sedan början av 2008 har CUPB och Uppsala universitet ett samarbetsavtal som ger oss unika forskningsmöjligheter. En första artikel är nu godkänd för publicering, ”The Long March of the Chinese Giant Oilfields”.

Abstract:
Over 70% of China’s domestic oil production is obtained from nine giant oilfields. Understanding the behaviour of these fields is essential to both domestic oil production and future Chinese oil imports. This study utilizes decline curves and depletion rate analysis to create some future production outlooks for the Chinese giants. Based on our study, we can only conclude that China’s future domestic oil production faces a significant challenge caused by maturing and declining giant fields. Evidence also indicates that the extensive use of water flooding and enhanced oil recovery methods may be masking increasing scarcity and may result in even steeper future decline rates than the ones currently being seen. Our results suggest that a considerable drop in oil production from the Chinese giants can be expected over the next decades.

De små oljefälten i Kina utgör idag 30% av produktion och trenden är fortsatt ökad produktion. Men, om några år kommer produktionsminskningen i gigantfälten att bli så stor att den total kinesiska produktionen kommer att minska. De närmaste åren kommer vi att uppleva en aggressiv budgivning från Kina då någon rättighet till oljeproduktion är till salu. Nästa steg är att man bygger nya raffinaderier i samarbete med nationella stora oljeproducenter så som Saudiarabien. Då Peak Oil drabbar världen kommer naturligtvis dessa raffinaderier att först fyllas med olja från Saudiarabien. För sin överlevnad måste OECD ta Peak Oil på allvar och planera en framtid energiförsörjning bortom Peak Oil.

För några år sedan såg jag en dokumentärfilm om Walmarts aggressiva inköpspolitik. Fabrik efter fabrik måste stängas i USA för att de inte kunde konkurera med producenterna i Kina. Till sist måste även USA:s sista fabrik för produktion av TV-apparater stängas. I slutet av programmet förflyttade vi oss till hamnen i Los Angeles och vi såg alla containerfartyg som anlände med alla varor från Kina. Hamnchefen utfrågades om export från USA till Kina och reporten föreslog en högteknologisk export, men den största exporten var något helt annat.

Den största exporten var returpapper som importerades till Kina för att tillvärka kartonger, som i sin tur exporterades tillbaka till USA med varor producerade i Kina. Ibland då jag är på det humöret brukar jag i mina föredrag säga att” Kina kan tacka Walmart för som fantastiska tillväxt”. Tillväxten har förvandlat Kina till en rik nation som nu har råd att betala mer än alla andra för de återstående rättigheterna att producera olja. Indirekt kan man påstå att Walmart har genom sin aggressiva inköpspolitik drivit på den utveckling som nu gjort det möjligt för Kina att ta för sig av de sista oljedropparna. Det faktum att det inte finns tillräckligt med olja för en fortsatt global expansion kan medföra att vi förutom Peak Oil kommer att se ”Peak Globalisation”

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