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U.S. Watches China’s Oil Demand With Concern

June 8, 2005

WASHINGTON — China’s global quest for crude oil is acceptable as long as the Asian nation develops the deposits and doesn’t hoard them, a senior State Department official said on Tuesday.

China, the world’s second-biggest oil user behind the United States, has recently scoured the globe for oil deals in Canada, Latin America and Africa.

Rapid Chinese oil demand growth was one of the factors that pushed U.S. crude oil futures above $55 a barrel.

“China’s energy needs are going to be enormous in the future,” said Christopher Hill, the State Department’s assistant secretary for East Asia and the Pacific.

“The question is, are they looking to develop energy or are they looking to take it off the market,” Hill told a Senate Foreign Relations subcommittee hearing on China’s growing economic might.

China consumes more than 7 million barrels per day of crude oil, versus U.S. consumption of about 20 million bpd.

State-run Chinese companies have spent billions of dollars on oil assets overseas to boost supplies for a country that imports 40 percent of its energy needs.

In written testimony, Hill voiced concern about China’s willingness to deal with nations frowned upon by the United States, including Iran and Sudan.

“The biggest impact on U.S. national interests is China’s willingness to invest in and trade with problem states” such as Iran, Sudan and Burma, Hill said in written testimony.

“We are concerned that China’s need for energy and other resources could make China an obstacle to U.S. and international efforts to enforce norms of acceptable behavior,” Hill said.

China has undermined U.S. efforts to pursue sanctions against Iran’s nuclear program in the U.N. Security Council, said Mikkal Herberg at the National Bureau of Asian Research. China has similarly blocked U.N. efforts to sanction Sudan for Darfur human rights violations, Herberg said.

A unit of China’s state-run Sinopec Group said earlier this year it plans to drill for oil and gas in Iran, Cuba and central Asia in 2005. It also signed a production-sharing contract with Cuba’s state oil firm Cupec in January.

Sinopec and two other oil giants, China National Petroleum Corp. and PetroChina, have spent more than $5 billion in oil and gas fields from Australia to Indonesia and Sudan to Saudi Arabia in recent years.

Sen. Lisa Murkowski of Alaska, who chairs the East Asian and Pacific Affairs subcommittee, said the United States faces growing competition from China in Canada, which is the biggest U.S. oil exporter.

Canadian and Chinese firms are cooperating to build a $2 billion pipeline to ship crude from Canada’s vast oil sands in Alberta to the West Coast to be sent via tanker to China.

“China has brought the competition for natural resources to our backyard,” Murkowski said.

Separately, the Energy Information Administration forecast that China’s oil demand would grow by 600,000 barrels per day in 2005 from last year. For all of 2005, China will consume an estimated 7.2 million barrels per day, with demand rising to 7.8 million bpd in 2006, the EIA said.




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