China Spans the Globe Searching for New Energy Sources
RENEE MONTAGNE, host:
One of the subjects in talks between President Hu and President Bush was access to energy resources. Officials in both countries have expressed concern over competition for those resources. China is now burning at least seven million barrels of oil a day, far less than U.S. consumption, But both countries are looking for more sources of oil, but fewer crude oil discoveries are being made.
Steve Inskeep recently spoke with an expert on Chinese oil consumption.
STEVE INSKEEP, host:
Mikkal Herberg has been tracking China's energy industry. He studies it at the National Bureau of Asian Research in Seattle. He says China's national oil companies have tried, and in many cases succeeded, in buying the rights to oil fields, from the islands of Indonesia, to the former Soviet states in Central Asia, to Sudan, and beyond.
Mr. MIKKAL HERBERG (National Bureau of Asian Research, Seattle): They've gone to a number of places around the world, investing in equity oil supplies, buying shares of oil fields. Another one would be Angola, in West Africa. So they've been very active, trying to find places where these companies can get access to equity oil deals and oil fields around the world.
INSKEEP: You mentioned Angola. You can see it on a map, West coast of Africa--huge oil supplier, huge natural gas supplier as well--and some experts have said that the story of the way that China and Western companies have competed in Angola, show the different approaches here. What has happened in Angola over time?
Mr. HERBERG: Well, as you know, China has bought into a large offshore oil field in Angola. That's been put together with a series of eight agreements and a $2 billion, I believe, loan to the Angolan government. China tends to package these things as partly oil deal, partly trade, partly aid--which cements a very broad kind of energy strategic alliance.
INSKEEP: Did you say a $2 billion loan to the Angolan government: a government that's not democratic, that doesn't have a good human rights record, and that the West has problems with?
Mr. HERBERG: You--you're pointing to exactly one of the real inflammatory issues in the U.S. Congress, and why energy has become a source of tension between the U.S. and China. Its relationships with a number of these key--problem states, as we call them, particularly Iran, Sudan--cozies them up to these regimes, creates a broad set of alliances, which then provides support to these governments and makes it more difficult for the U.S. to try to pressure these regimes for human rights improvements--governance improvements.
INSKEEP: You're saying that China is expanding its commercial ties with the very same countries that the United States tends to pass sanctions against and refuse to deal with. Does the U.S. effort at sanctions actually open the field for China?
Dr. HERBERG: Absolutely. It creates an almost irresistible opportunity for the Chinese national oil companies. These are, you know, these companies are latecomers to the international oil game. They're competing with big, sophisticated international companies like ExxonMobile. The few places where they can get an opportunity for a more open playing field would be these countries where the U.S. has unilateral sanctions.
INSKEEP: We know the United States is looking for more sources of oil--that Western oil companies are looking for more reserves. China, as you've described is looking for more sources of oil. Is either country doing very much to reduce demand?
Dr. HERBERG: No, and I think that's kind of the thing that people are not focused on. Everybody's focused on supply and where that supply is coming from. China has underpriced its energy supplies. It subsidizes prices. For example, today in Beijing, gasoline prices are probably about a dollar, seventy-five a gallon. So, what that means is demand grows even faster than it already does when you're economy's growing at nine and 10 percent GDP growth rates. So, China needs to begin to deal with that very high rate of oil demand growth.
INSKEEP: You're saying that China, essentially, does the opposite of conserve energy; it makes energy even cheaper and easier to burn when it comes to oil.
Dr. HERBERG: Exactly. It's subsidizing consumption of oil. It helps stimulate economic growth. And the thing that keeps the leadership awake in Beijing at night is job creation and economic growth. And they also worry about the social impact and the political fallout of raising fuel prices. Once you get a population used to relatively low energy prices, it's an extremely difficult political proposition to raise those prices.
INSKEEP: Is that economy in China still new enough--still young enough, that if there was proper leadership, that they could dramatically change the way they use energy and conserve a lot of it, and really affect the world economy?
Dr. HERBERG: Absolutely, I think, if you saw a much-accelerated program in China to bring down that demand curve. In effect, China is the Saudi Arabia of energy efficiency. In other words, if they were to move more quickly on pricing and other reforms on the demand side, that could take a lot of pressure off global markets, particularly global oil markets.
INSKEEP: Mikkal Herberg, of the Asian Energy Security Program at the National Bureau of Asian Research in Seattle. Thanks very much for speaking with us.
Dr. HERBERG: Thank you, enjoyed it.
MONTAGNE: And President Hu's next stop is Riyadh, the capital of Saudi Arabia. He arrives there tomorrow, beginning a state visit that is likely to focus on China's demand for oil. This will be a reciprocal visit. Three months ago, Saudi king, Abdullah, traveled to Beijing for his first-ever visit, as the monarch of his country.
After Saudi Arabia, President Hu travels to Morocco, Kenya and Nigeria, which is another major oil exporter.
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