Hosting world’s largest population and fastest growing economy with an exceptional rate of almost 10% GDP growth per year on average over the past decade, China also faces the consequences of its enormous size. Especially, China’s demand for energy sources dominates the most recent concerns in its domestic and international agenda. Despite being the sixth largest oil producer (Table 1), China is the world’s third largest oil importer behind the United States and Japan. In fact, China became a net oil importer in 1993 and since then its demand for oil is rapidly increasing. Consequently, finding diverse energy sources and thus sustaining energy security became the main objective of Chinese foreign policy and investments. For this reason, over the past couple of years, especially following Middle East’s loss of its stability and trustworthiness as an oil exporter subsequent to the aftermath of 9/11, China started to look for alternative ways to broaden its imported oil spectrum. Africa which was unluckily ignored by the Western states for a long time, turned out to be the first and most convenient destination for China in this crucial search for cheap, sustainable, and secure energy. But before telling the story of Sino-African “affair”, it is necessary to look at the details of China’s energy consumption and have an overview of its energy sector.
Table 1
According to Energy Information Administration reports, China possesses 18.3 billion barrels of proven oil reserves as of January 1, 2006. In response to its 3,806.2 thousand barrels oil production per day, daily Chinese oil consumption is 6,899.6 thousand barrels. This natural resources giant, also owns world’s largest coal reserves with 126,214.7 million short tons of recoverable coal reserves where coal production is approximately 2,156.4 million short tons and consumption is 2,062.4 million short tons. In addition to oil and coal reserves, China has 53.3 trillion cubic meter proven natural gas reserves. As far as natural gas import and export is concerned China’s production of natural gas by 1.4 trillion cubic feet is slightly above its consumption by 1,350.5 billion cubic feet per year as of 2004. With these numbers in mind, the distribution of total energy consumption in China is as follows:
Out of 59.6 quadrillion Btus, 69% of total energy consumption is supplied by coal, 22% by oil, 6% by hydroelectricity, 3% by natural gas and 1% by nuclear energy. Energy intensity in China is 9,080 Btu per $2000-PPP where total per capita energy consumption is 34.9 million Btus. For the sake of comparison, it would also be useful to mention energy intensity and per capita energy consumption of the United States where total per capita consumption was 339.9 million Btus and energy intensity was 9,568.5 Btus per $2000-PPP as of 2003.
These conditions naturally have environmental consequences which brings along the question of China’s commitment to contribute to the fight against global warming. In particular, China is the third largest carbon dioxide emitter behind the US and the EU, however when it comes to emissions per capita, China is still behind many industrialized countries; 99th out of 211 states. Indeed, this fact prepares for the bases of China’s bargaining power in carbon dioxide emissions reduction under Kyoto Protocol.
Environmental concerns and facts aside, considering the organization of energy sector, a fairly interesting picture becomes apparent. Most importantly, Chinese oil sector reveals a mostly state owned and vertically integrated structure where three majorly state owned firms control the energy sector. Both production and exploration are managed by China National Petroleum Corporation (CNPC), China Petroleum and Chemical Corporation (Sinopec) and China National Offshore Oil Corporation (CNOOC). Besides the onshore activities of these firms, all three have explored production opportunities in other countries. With the aim of expanding for oil exploration and production overseas, they invested on many different countries especially over the past couple of years.
Table 2
Naturally, the exploration of these Chinese energy giants for new sources brings the question of alternating energy sources to the foreground. As mentioned before, due to stability and energy security concerns, China has been working on diversifying its imported oil sources and African states blessed with oil and other valuable minerals became the object of Chinese critical attention. As of 2006, formerly Saudi Arabia centered Chinese oil import, shifted to Angola as one of many African states trading and cooperating with China in several other areas. Industry reports show that in 2006, Angola exported 750,000 bbl/d of crude oil to China, where 32% of total Chinese oil import was from Africa alone (Table 2). The nature of this trade can be also seen from the specific actions taken by the above mentioned oil production giants. In particular, CNPC has invested more than $8 billion in Sudan’s oil sector, including investments in a 900-mile pipeline to the Red Sea, whereas CNOOC purchased a 45% stake in an oil and gas field in Niger Delta for $2.3 billion and made smaller acquisitions in Equatorial Guinea and Kenya such as exploration and development rights in 2006. Thus, no wonder why Beijing declared 2006 as “Year of Africa” while the continent almost as a whole made a massive contribution to Chinese growth in international oil sector.[1]
On the other hand, it is also crucial to examine the structure of this energy trade between China and African states, it reveals some significant differences as far as other oil import-export relationships in the world are concerned. First of all, China’s trade relations with Africa are based primarily on aid and infrastructure support as opposed to other commonly signed trade agreements. While China sees Africa as a perfect source to diversify its oil import, Chinese businessmen perceive African countries as very promising markets for their products. Thus, the trade between China and Africa takes a step further and from being merely oil oriented, it passes to a state of comprehensive alliance. As a result of these strong ties developed day by day, Chinese companies get priority in excessing African markets, where Chinese enterprises also build schools, hospitals and railroads in return. For instance, China guaranteed a significant share with a $2 billion loan and aid in future oil production in Angola which already exports one fourth of its oil production to China.
In fact this is only a small part of the big picture. To start with, China has written off at least $1 billion African debt and more are expected. Chinese aid to Africa totaled $5.75 billion in 2006. Accordingly, trade between China and Africa has reached to $56 billion in the same year. Particularly Chinese Exim Bank, currently the world third largest export credit agency, approved $20 billion worth of loans for African states. As of September 2006, 36 African countries benefited from over 250 China Exim Bank projects which were majorly infrastructure development projects. The countries receiving these projects and aids included Sudan, Ghana, Zambia, Nigeria, and Congo[2] which appear to be countries with significant energy resources trading with China.
Within the light of these facts, it shouldn’t be suprising to hear some complaints rising against this Sino-African trade, investment and aid trio. Especially some Western countries which stayed away from African internal conflicts and thus overlooked the opportunity in African energy sources, now criticize China for supplying weapons to Africa with the help of trade ties. Sudan, Equaritorial Guinea, Ethiopia and Eritrea, and Zimbabwe are some of the African countries bought arms from China. Interestingly enough these countries indeed are the ones trading with China. In response to these criticisms, Chinese blame Western “colonialists” for exploiting Africa for centuries. They claim that strong ties with African states “will not pose any threat to the interest of European and American oil giants. Instead, it will help Africa prospect and diversify its investment”[3] where they also state that unlike Western countries China not only made trade agreements but also implemented infrastructure development projects to support African countries.
Other criticisms include both African concerns on cheap Chinese good and services hurting domestic markets and international fair competition issues since all these import-export activities are run by state owned companies. All parties blame each other for various reasons, however in the mean time energy corporation between China and Africa continues to grow and the situation will most probably stay as it is for a long time, because unlike others, China aimed long-term trade agreements signed with local administrations and enterprises and it was volunteered to enter the conflict areas within African countries while avoiding to interfere with internal issues. As of today, it seems that the anxiety for the future of energy security will carry on and the competition for more energy sources among giants in the world economy will escalate as long as global demand for energy continues to grow rapidly.
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