Published by: THE WORLD UYGHUR NETWORK NEWS 1 October 1997

China News Digest, 09/28/97

[CND, 09/28/97] AFP English Wire reports that China has signed a US$ 9.5 Billion contract with Kazakhstan to exploit the potentially rich Ozen oil field and lay a 3,000 km (1875 mile) pipeline into China. China also surprised the world oil markets by signing a large-volume agreement to buy oil from Iraq, quickly on the heels of the partial lifting of oil-sale sanctions on Iraq by the United Nations.

The contracts add to existing agreements to buy Kazakh oil from other fields, as well as exploration and production projects in Peru, Sudan, and Venezuela. These actions further revise the long-standing Chinese policy of depending upon reserves in Xinjiang province.

Development of Xinjiang production is far behind schedule, and has fallen far short of China's burgeoning energy demand. In 1996 Chinese oil imports had grown to 100,000 barrels per day (bpd), and have already reached 500,000 bpd in 1997. The figure is expected to reach 3,000,000 bpd by the year 2005.

The shift coincides with the replacement of former Chinese National Petroleum Company (CNPC) President WANG Tao, a staunch believer that Xinjiang would eventually completely meet China's energy needs, with ZHOU Yongkang. A Chinese oil industry representative said that "Zhou is far more outward-looking than Wang, and he realised that China was going to need guaranteed supplies from overseas long before -- if ever --Xinjiang finally came good."

The China deal offered Kazakhstan better logistics and efficiencies, due to the geographic advantages and the diversion away from highly competitive traditional Persian Gulf markets. Nevertheless, CNPC had to fend off advances from a number of multinational oil companies to land the Kazakh contract.

The CNPC Western Exploration Manager was quoted as saying "The pipeline is, perhaps, the most important part of the deal. If CNPC can get a significant amount of oil moving down from Kazakhstan, it might be able to commercially justify the building of another pipeline from Xinjiang all the way across China to the eastern coast." (Phil STEPHENS, Guochen WAN)