---

http://business.timesonline.co.uk/article/0,,13132-2251243,00.html

Thirst for oil fuels China's grand safari in Africa

THE battered signs in the lobby of the main international hotel in Lubumbashi,
capital of Congo's mineral-rich Katanga province, had barely changed in years.
Next to the faded, out-of-date insignia of the traditional European airlines, they
give details of all direct and non- direct flights to Paris, Brussels, Zurich, and London
the favoured destinations of the frequent visitors from Europe's mining houses.

A few months ago, however, Kenya Airways, Africa's fastest growing airline
proudly declared in bold new colours the latest additions to its network,
direct flights to Guangzhou and Hong Kong.

To many, the difference in signs symbolised Africa's changing relationships
with the world, one with Europe, old and out-of-date, the other with China,
brash and growing.

Few people in the former Belgian Congo were surprised at the development.
They have watched over the past two years as the number of Chinese businessmen
on flights in and out of the country has grown from a trickle to a torrent, matched by
similar incursions into neighbouring Zambia and Angola.

"They started coming in about two years ago, but they were small-time merchants
and set up as middlemen buying from local outfits," said Jean-Pierre Kabongo,
who runs a miners' association in Katanga. "Now they are buying the companies themselves."
China is moving into Africa on a grand scale. Still a developing nation itself, it has
nonetheless now overtaken Britain to be the continent's third-biggest trading partner
after the United States and France. Its inroads into the world's poorest continent are
the the most striking sign of the biggest shake-up in patterns of world trade in a generation.

The pace of change is startling: in the first four months of this year, Chinese imports from
African countries totalled nearly $9 billion (£4.9 billion) - a small figure by world standards,
but up by more than 50 per cent from the same period a year ago. In 2005 total trade flows
reached $39.8 billion, a doubling in volumes in just two years, and nearly four times the level
of trade in 2001.

For the world's fastest growing economy, Africa is first and foremost a supplier of oil. In Sudan,
state-owned oil companies have been investing since Western companies left in the mid-1990s.
In 1996 China bought a 40 per cent stake in two oilfields and since 1998 it has helped to build a
930-mile pipeline from the fields to the Red Sea. Last year it bought 50 per cent of Sudan's oil exports,
accounting for 5 per cent of its needs.

China has stakes in extraction in Nigeria, Angola and Algeria, among others. Its biggest deal so
far came in January when CNOOC, the state-owned energy company, announced it would buy
a 45 per cent stake in an offshore oilfield in Nigeria for $2.3 billion.

Other countries benefit from China's position as the world's leading importer of base metals.
Africa now supplies one third of China's manganese; South Africa is the fourth- largest supplier
of iron ore to China; and 85 per cent of Chinese imports of cobalt come from the Republic of Congo,
the Democratic Republic of Congo and South Africa.

Projects range from diamond mining and timber logging to cotton and telecoms. About 800 Chinese
companies are now working in Africa, and one estimate puts the number of expatriate Chinese workers
in Africa at 78,000. A key to their success is the willingness of Chinese state-run companies to undercut
their Western rivals and take on the projects they dismiss as too risky. Zambia's neglected Chambishi
copper mines are being overhauled by China, and around them has sprung up what visitors describe as
the fastest-growing Chinatown in the world.
CNOOC recently agreed to pay $2.3 billion to rehabilitate the Kaduna oil refinery in Nigeria, a loss-making
project which no privately owned Western company would touch.

And China is building not just mines and refineries in Africa but the very infrastructure itself: roads,
bridges and power grids across the continent are being thrown up by Chinese firms. Flows of foreign
direct investment from China into Africa have risen from $1.5 million in 1991 to $107.4 million in 2003,
according to the Ministry of Commerce. China has sent 1,100 doctors to Africa, taken African students
to China on educational exchanges, and designated 16 African countries as official tourism venues.

If Western nations were to intervene so widely it would be decried as colonialism. But China's success
is partly because of its willingness to ignore politics and focus on what makes business sense. Its firm policy
of non-interference in the domestic affairs of other countries, born out of its dislike of foreign interference in
its own affairs, makes it a popular player in the eyes of many African governments, particularly those, such
as Robert Mugabe's Zimbabwe, that can find few other international supporters. The scrapping of hundreds
of tariffs on African imports and a $1.3 billion debt write-off in 2003 have also strengthened relations.

Chinese leaders have dubbed 2006 the "Year of Africa" and are aggressively courting the continent. Li Zhaoxing,
the Foreign Minister, visited in January and President Hu Jintao followed in April. On a seven-country tour last week,
Wen Jiabao, the Prime Minister, agreed to restrict textile and clothing exports to South Africa to dampen opposition
from local garment producers.

The International Monetary Fund now estimates that Africa's growth is edging towards 6per cent, its highest in 30
years, partly because of Chinese investment and its soaring demand for raw materials.
Gerard Lyons, chief economist at Standard Chartered Bank, said that Africa was only part of the picture. "Globally,
we're seeing new corridors of trade opening out between regions in terms of flows of commodities, goods, people
and investment. This is just one aspect of it."

In oil-rich, war-torn Angola, Chinese companies will build railway lines, schools, roads, hospitals, bridges, offices
and a fibre-optic network, thanks to a $2 billion loan deal in which Beijing can secure a stake in the country's
offshore oilfields. Last week it pledged a further $2 billion loan to the country.
But that approach has caused concern in Western countries, who mutter that China's loans are undermining
attempts to link aid to reform and break the cycle of African countries' indebtedness. Equally critics add that
although the West is moving away from "tied aid", Chinese generosity often comes with requirements to employ
Chinese citizens or to buy in Chinese resources.

Another worry is weapons sales: according to the US Congressional Research Service, Chinese arms sales
made up 10 per cent of all conventional arms transfers to Africa from 1996 to 2003. China has faced allegations
of providing weapons used by the Islamic government in Khartoum to terrorise civilians in Darfur, and of selling
fighter jets and radio-jamming devices to Zimbabwe.

Alarm is greatest in the US, where a recent Energy Department report argued that China's tolerance of despotic
regimes could undermine Washington's strategic goal to spread democracy and free trade.
There are several motives behind China's African safari. First, it makes economic sense: China requires access
to oil and natural resources on a vast scale and wants them delivered securely. But there are also political drivers.
China can use its financial muscle to drive forward its acceptance as a market economy and to exert pressure on
the two dozen or so countries that still recognise Taiwan.

Its ultimate strategic goal, however, is unclear, perhaps because it has only just begun to consider it.
"Involvement in Africa crystallises China's dual identity between being a developing country and a major power,
" Andrew Small, China programme manager at the Foreign Policy Centre, a UK think-tank, said.
"They have achieved a position of far greater importance in Africa than they probably planned to."
However, Ann Grant, of Standard Chartered Capital Markets, said: "China has a strategic approach
to Africa, in which the markets, the energy security and the political relationships are all very much of a piece.
They are looking not at the next two to three years but at the next 15 to 20 years."

Deutche Bank Research estimates that China will remain "hungry for commodities" for at least the next
15 years. In particular, it forecasts China's annual demand for oil to rise by 20 per cent a year, from
91 million tons in 2005 to a staggering 1.9 billion tons in 2020. By 2045 China is projected to rely
on imported oil for 45 per cent of its energy needs.

In the old Belgian mining town of Likasi, a 75-mile drive from Lubumbashi, China has opened a new
cobalt plant, the Feza Mining Company. Rundown suburban houses, once the homes of expatriate managers,
are being repaired and taken over by the new arrivals.

"Production is still small but we should be able to expand it very quickly; the ground here is so rich,"
one of its managers, Willy Zhang, told The Times on a recent visit.
Nearby, Chinese labourers were working alongside Congolese, paving a new road to two mines
bought from the bankrupt state giant Gecamines by a Chinese consortium.

Mr Kabongo sums up the situation laconically. "No one knows who they are, but they are Chinese," he says.
--

Jan Rasmussen

---

http://www.marketwatch.com/News/Story/9FwM5lDXhkGcc4v45jz4116?siteid=mktw&dist=TNMostMailed
China and Saudi Arabia: interesting SPR team up?

China may tap Saudis to fill its oil reserve, a move likely to influence prices.

By Myra P. Saefong, MarketWatch Last Update: 12:04 PM ET Jun 23, 2006

SAN FRANCISCO (MarketWatch) -- A deal between the globe's most populous nation
and the biggest oil producer in the world may hold significant consequences for oil prices,
but experts disagree on exactly what that outcome might be.

China and Saudi Arabia are reportedly discussing an agreement to import oil from
Saudi Arabia to fill China's strategic oil reserves.

The goal was to have about 800 million barrels in the reserve, said Phil Flynn, a
senior analyst at Alaron Trading, who cited comments from China's Finance Minister Jin Renqing last year.

That would be larger than the strategic petroleum reserve in the United States, the
biggest stockpile of government-owned emergency crude, which peaked at an all-time
high of 700.7 million barrels of oil in August 2005 and can hold as much as 727 million barrels.
Its current inventory stands at 688.6 million.

When the U.S. started its strategic petroleum reserve in 1977, imported crude-oil prices
remained fairly steady for nearly two years, according to data from WTRG Economics.

Then prices climbed past $15 a barrel despite a steady climb in the SPR level to more than 70 million barrels.
Imported oil prices didn't fall back to the $12 level until 1986 though by then, the SPR level had
reached 500 million barrels, the data showed. That could provide a hint for China's SPR. Filling it
may cause a climb in oil prices because it'll draw from market inventories. At the same time, it
could prompt a price decline since a reserve would also offer a cushion in case of supply disruptions.
Either way, it may take time for an SPR in China to influence prices, given that the first of the oil reserve
facilities isn't expected to start operation until at least the end of this year.

"All of the above are correct -- or can be," said James Williams, an economist at WTRG Economics.

Prepping for storage

China's first strategic petroleum reserve base will be completed in August in Zhenhai, in the eastern
Zhejiang Province, according to a June 17 report from the Xinhua News Agency. The government
had announced the building of reserve bases back in 2004, it said.
Another three bases are scheduled for completion in the next two years, according to the China News Service.
China's energy policy bureau has said no imported oil will be purchased for the bases as long as
international prices remained high, according to the Xinhua report. But earlier this week, the Chinese
government said it's in talks with Saudi Arabia on importing oil to fill its strategic reserves, according
to Dow Jones Newswires. The deal would involve large volumes of Saudi crude, with the first shipments
unlikely to come before year's end. "This is probably a first step toward building a very big reserve in China,"
said Flynn, pointing out that China stated about a year ago its desire to have a strategic reserve larger than
that of the United States. And "this obviously is a very bullish development."

That means "China is really going to be a competitor with the U.S. for oil supplies," he said.

Reserving influence

But which direction the possible collaboration between China and Saudi Arabia may drive
crude prices remains in question. While a reserve is being filled, it is the same as an increase
in consumption," said Williams, pointing out that it "takes crude from the market, which can
have the affect of raising prices."

Indeed, "the amount of oil that eventually could be diverted to the reserve should keep supply
tight," said Alaron's Flynn. Once filled, the "existence of additional spare barrels makes the market
more comfortable in times of supply interruptions," said Williams.

That would limit the price increase that comes will any inventory disruptions -- and the more
crude there is in SPRs, the greater the cushion, he said.

Industry and government-controlled petroleum supplies in industrialized countries which are
members of the Organization for Economic Cooperation and Development totaled 4.1 billion barrels
as of February of this year, with 1.5 billion of that pegged as available for emergency use, according
to data from the Energy Department.

With worldwide oil use at around 84 million barrels per day and 1.5 billion barrels available for emergencies,
the world has about 18 days worth of emergency oil at its disposal.

If the China/Saudi deal pans out, "more reserves would be fundamentally price bearish
or at least dampening," said Jason Schenker, an economist at Wachovia Corp.

Then again, "no one wants -- except in [a] dire emergency -- to dip into SPRs and the
commercial petroleum in OECD countries is not really all usable in a practical sense," Williams said.

For example, say 20% to 30% of the U.S. industry's supply of 1.04 billion commercial barrels
is in pipelines right now, and 870 million barrels is considered minimum inventory to just operate
the system, he said. "On the commercial side, that only leaves about 130 million barrels of wiggle room,
or about 6-7 days of U.S. consumption."

"The [U.S.] SPR gives an additional 30 days but if you use it, it is gone," he said.
China approach

There are actually two different ways China can approach a potential agreement with Saudi Arabia, said Williams.
It can develop storage facilities and fill them with crude purchased from Saudi Arabia or elsewhere,
he said. Or, with Saudi cooperation, fill it with Saudi oil that is still owned by Saudi Arabia.

The latter would give Saudi Arabia a place outside the kingdom to store oil and give the Saudis
"some flexibility if there were an event that interrupted their production or shipments," said Williams.

In that case, Saudi Arabia would have oil to put on the market, and it would be a "ready" market,
he said, implying that the location of the oil in China -- the world second-largest consumer of oil
-- would be a definite advantage.

And if the Saudis kept their "title" to the oil, "it would not count against their quota as they filled
the reserve," he said. But Williams doubted that Saudi Arabia would do anything that would increase
the price of oil, which is what shipping oil to an SPR -- when it's needed on the market -- would do.

"They are doing all they can to add capacity and provide enough spare capacity to take some of the
speculative air out of oil prices," he said. "I don't see them doing anything to change that policy."

Myra P. Saefong is a reporter for MarketWatch in San Francisco.
---


Jan Rasmussen

---

http://english.people.com.cn/200606/30/eng20060630_278863.html

Gazprom to build two pipelines transmitting natural gas to China

Gazprom is planning to build two pipelines transmitting natural gas from
Russia to China with an annual gas transmission capacity of 68 billion cubic meters,
said sources with the Russian news center in Beijing on Friday.

Through video-live broadcast, Alexei Miller, Chairman of the management
committee of Gazprom, said at the annual meeting of shareholders held in Moscow
that the western pipeline with an annual transmission capacity of 30 billion
cubic meters will be considered first.

The western line project plans to transmit natural gas produced in West
Siberia to China, said Miller. According to Miller, negotiations between
Russia and China on construction of the pipelines are underway and the
first pipeline is estimated to go into operation in 2011.

The Asian-Pacific region is expected to see sharp growth in demand for
natural gas and China is one of the most potential markets, he said.
The joint-stock company is Russia's largest natural gas producer.
--

Jan Rasmussen

---

http://www.atimes.com/atimes/China/GF04Ad07.html
The ties that bind China, Russia and Iran

In March 2004, China's state-owned oil trading company,
Zhuhai Zhenrong Corporation, signed a 25-year deal to import
110 million tons of liquefied natural gas (LNG) from Iran. This was
followed by a much larger deal between another of China's state-owned
oil companies, Sinopec, and Iran, signed in October 2004. This deal, worth
about $100 billion, allows China to import a further 250 million tons of LNG
from Iran's Yadavaran oilfield over a 25-year period. In addition to LNG,
the Yadavaran deal provides China with 150,000 barrels per day of crude
oil over the same period.

This huge deal also enlists substantial Chinese investment in Iranian energy exploration,
drilling and production as well as in petrochemical and natural gas infrastructure.
Total Chinese investment targeted toward Iran's energy sector could exceed a further
$100 billion over 25 years. At the end of 2004, China became Iran's top oil export market.

---------

The military implementation of the George W Bush administration's unilateralist foreign policy is creating monumental changes in the
world's geostrategic alliances. The most significant of these changes is the formation of a new triangle comprised of China, Iran
and Russia.

Growing ties between Moscow and Beijing in the past 18 months is an important geopolitical event that has gone practically
unnoticed. China's premier, Wen Jiabao, visited Russia in September 2004. In October 2004, President Vladimir Putin visited China.
During the October meeting, both China and Russia declared that Sino-Russian relations had reached "unparalleled heights". In
addition to settling long-standing border issues, Moscow and Beijing agreed to hold joint military exercises in 2005. This marks the
first large-scale military exercises between Russia and China since 1958.

The joint military exercises complement a rapidly growing arms trade between Moscow and Beijing. China is Russia's largest buyer of
military equipment. In 2004, China was reported to have signed deals worth more than $2 billion for Russian arms. These included
naval ships and submarines, missile systems and aircraft. According to the head of Russia's armed forces, Anatoliy Kvashnin, "our
defense industrial complex is working for this country [China], supplying the latest models of arms and military equipment, which
the Russian army does not have". Russia's relations with China are not limited to military trade. In the past five years,
non-military trade between Russia and China has increased at an average annual rate of nearly 20%. Moscow and Beijing have targeted
non-military trade to reach $60 billion by 2010, from $20 billion in 2004. One of the key components of commercial trade is Russian
energy exports to China.

In early 2005, Moscow agreed to more than double electricity exports to China, to 800 million kilowatt hours (kWh), by 2006.
Officials at Russia's electricity monopoly, Unified Energy Systems, are also courting Chinese investment in the development and
renovation of Russia's electricity system. In October 2004, the China National Petroleum Corporation (CNPC) and Russia's Gazprom
signed a series of agreements intended to study how Russia can best supply natural gas to China. At the same time, Russia signed
specific agreements with China on oil exports.

Russia's oil shipments to China are slated to reach 10 million tons in 2005, increasing to 15 million tons in 2006. All of these
shipments will be made by rail. However, this agreement was overshadowed by talks concerning the construction of an oil pipeline
from Siberia to northern China. Russia has been pondering an oil pipeline to China for nearly 10 years. In 2002, plans for this
pipeline received a boost when Moscow pledged to invest $2 billion in an oil pipeline running from the Siberian city of Angarsk to
Daqing in northeastern China.

At the end of 2004, Russian officials announced that rather than running into China, the new mega pipeline would terminate in
Russia's Pacific port of Nakhodka. Japan lobbied Moscow hard for this configuration, offering to finance the entire construction
project, the cost of which is estimated to exceed $10 billion. In addition to a readily available financing source, the Nakhodka
pipeline will remain entirely in Russian territory, allowing Moscow complete control over the oil flow.

Many analysts viewed Moscow's decision as a blow to relations with China. Though the pipeline does not terminate in China, it does
pass within 40 miles of Russia's border with China. A spur from this pipeline to China would be inexpensive, while further
diversifying the market for annual oil flows expected to reach 80 million tons. In other words, why should either Moscow or Beijing
finance an eastern oil pipeline when Tokyo is bending over backwards to provide such financing?

More indicative of Russia's deepening energy relations with China are the circumstances surrounding the renationalization of Russian
oil major Yukos. Yukos was the only Russian company exporting oil to China. Russia's government effectively renationalized Yukos in
late 2004 when it seized the company's primary production unit, Yuganskneftegaz, and auctioned it off to the highest bidder.
Yuganskneftegaz, located in Siberia, is Russia's second-largest oil producer.

Through somewhat twisted means, Russia's state-owned oil company, Rosneft, acquired Yuganskneftegaz for $9.3 billion. In December
2004, Russia's Industry and Energy Minister Viktor Khristenko offered the CNPC a 20% stake in Yuganskneftegaz. In February 2005,
Russian Finance Minister Alexei Kudrin revealed that Chinese banks provided $6 billion in financing for Rosneft's acquisition of
Yuganskneftegaz. This financing was secured by long-term oil delivery contracts between Rosneft and the CNPC.

It is unclear whether the CNPC owns a portion of Yuganskneftegaz. However, in March, Russian authorities approved a merger between
state-owned gas company Gazprom and Rosneft. This merger excludes Yuganskneftegaz, which will remain a separate state-owned company.
It is possible that Yuganskneftegaz was left a stand-alone unit to facilitate China's investment in the company.

China's involvement in the renationalization of Yukos represents the most significant foreign participation in Russia's highly
guarded oil sector. The CNPC is also involved in several joint ventures with Russia's state-owned gas company, Gazprom. These
include ventures to develop energy reserves in Iran, the home of China's largest energy-related investments.

Beijing and Moscow warm to Tehran.
In March 2004, China's state-owned oil trading company, Zhuhai Zhenrong Corporation, signed a 25-year deal to import 110 million
tons of liquefied natural gas (LNG) from Iran. This was followed by a much larger deal between another of China's state-owned oil
companies, Sinopec, and Iran, signed in October 2004. This deal, worth about $100 billion, allows China to import a further 250
million tons of LNG from Iran's Yadavaran oilfield over a 25-year period. In addition to LNG, the Yadavaran deal provides China with
150,000 barrels per day of crude oil over the same period.

This huge deal also enlists substantial Chinese investment in Iranian energy exploration, drilling and production as well as in
petrochemical and natural gas infrastructure. Total Chinese investment targeted toward Iran's energy sector could exceed a further
$100 billion over 25 years. At the end of 2004, China became Iran's top oil export market. Apart from the oil and natural gas
delivery contracts, the massive investment being undertaken by China's state-owned oil companies in Iran's energy sector contravenes
the US Iran-Libya Sanctions Act. This law penalizes foreign companies for investing more than $20 million in either Libya or Iran.

Side-stepping US laws is nothing new for China. Beijing, as well as Moscow, has supplied Tehran with advanced missiles and missile
technology since the mid-1980s. In addition to anti-ship missiles like the Silkworm, China has sold Iran surface-to-surface cruise
missiles and, along with Russia, assisted in the development of Iran's long-range ballistic missiles. This assistance included the
development of Iran's Shihab-3 and Shihab-4 missiles, with a range of about 2,000 kilometers. Iran is also reportedly developing
missiles with ranges approaching 3,000 kilometers.

In late 2004, former secretary of state Colin Powell asserted that Iran was working to adapt its long-range ballistic missiles to
carry nuclear warheads. China was also believed to be producing several new types of guided anti-ship missiles for Iran in 2004.
China's and Russia's sales of missiles and missile technology as well as missile development assistance contravenes the
US-Irannon-proliferation act of 2000. This act specifically states that sanctions will be "imposed on countries whose companies
provide assistance to Iran in its efforts to acquire weapons of mass destruction and missile delivery systems".

In the past several years a number of Chinese and Russian companies have faced US sanctions for selling missiles and missile
technology to Iran. Rather than slowing or stopping such sales, the pace of missile acquisition and development in Iran has
accelerated. Like relations between China and Russia and China and Iran, Russia's relations with Iran have also advanced
considerably in the past 18 months. In addition to increased investment in Iran by Russia and burgeoning arms trade between the two
countries, Russia has been heavily involved in Iran's nascent nuclear energy industry.

After much wrangling and repeated US intervention, Russia and Iran finally signed, in February, a deal clearing the way for the
shipment of Russian nuclear fuel to Iran's nuclear power plant at Bushehr. Washington's primary concern about Bushehr is the
intended use of the plant's spent nuclear fuel. This fuel can be discarded, reprocessed, or used in the manufacture of weapons-grade
plutonium. In an effort to assure Washington that the last of these three possibilities will not come to pass, Moscow has promised
that all the spent fuel from Bushehr will be returned to Russia.

Nonetheless, Washington continues to believe that Bushehr's start-up will advance Tehran's supposed nuclear weapons program. Though
evidence of an Iranian weapons program is sparse, the US remains convinced that Iran is working to develop nuclear weapons with
Russian assistance.

The new geostrategic alliance
Along with energy trade, investment and economic development, the China-Iran-Russia alliance has cultivated compatible foreign
policies. China, Iran and Russia have identical foreign policy positions regarding Taiwan and Chechnya. China and Iran fully support
the Putin government's war against the Chechen separatists (Iran's self-described status as an "Islamic republic" notwithstanding).
Russia and Iran support Beijing's one-China policy. The recent promulgation of China's anti-secession law, aimed at making Beijing's
intolerance of Taiwanese independence explicit, was heartily commended in both Moscow and Tehran.

The most compelling aspect of this alliance is revealed in China's and Russia's support for Iran's much-maligned nuclear energy
program. The Putin government has consistently maintained that Russia would not support UN Security Council resolutions that condemn
Iran's nuclear energy program or apply economic sanctions against Iran. In February, Putin said he was convinced Iran was not
seeking to develop nuclear weapons and announced plans to visit the country, in support of Tehran, just prior to his summit with
President Bush.

Beijing has echoed Moscow's opposition to UN action against Iran. After concluding the historic gas and oil deal between China and
Iran in October 2004, China's Foreign Minister Li Zhaoxing announced that China would not support UN Security Council action against
Iran's nuclear energy program. Opposition in Moscow and Beijing to UN action against Iran is significant because both countries hold
UN Security Council veto power.

The endorsement of Tehran's nuclear energy program by Moscow and Beijing reveals the primary impetus behind the China-Iran-Russia
axis - to counter US unilateralism and global hegemonic intentions. For Beijing and Moscow, this means minimizing US influence in
Asia, Central Asia and the Middle East. For the regime in Tehran, keeping the US at bay is a matter of survival.

The joint statement issued at the conclusion of Putin's state visit to China in October 2004 was a clear indication of Beijing's and
Moscow's abhorrence of the Bush administration's unilateral foreign policy. The statement noted that China and Russia "hold that it
is urgently needed to [resolve] international disputes under the chairing of the UN and resolve crisis [sic] on the basis of
universally recognized principles of international law. Any coercive action should only be taken with the approval of the UN
Security Council and enforced under its supervision..."

Two weeks after this statement was released, and just prior to the US presidential election, Beijing's position against US
unilateralism was again made explicit by China's former foreign minister Qian Qichen - arguably China's most distinguished diplomat.

In an opinion piece published in the state-controlled China Daily, Qian ripped Washington's unilateralism: "The United States has
tightened its control of the Middle East, Central Asia, Southeast Asia and Northeast Asia." He noted that this control "testifies
that Washington's anti-terror campaign has already gone beyond the scope of self defense". Qian went further, stating that: "The US
case in Iraq has caused the Muslim world and Arab countries to believe that the superpower already regards them as targets [for] its
ambitious democratic reform program."

To China and Russia, Washington's "democratic reform program" is a thinly disguised method for the US to militarily dispose of
unfriendly regimes in order to ensure the country's primacy as the world's sole superpower. The China-Iran-Russia alliance can be
considered as Beijing's and Moscow's counterpunch to Washington's global ambitions. From this perspective, Iran is integral to
thwarting the Bush administration's foreign policy goals. This is precisely why Beijing and Moscow have strengthened their economic
and diplomatic ties with Tehran. It is also why Beijing and Moscow are providing Tehran with increasingly sophisticated weapons.

Jephraim P Gundzik is president of Condor Advisers, Inc. Condor Advisers provides emerging markets investment risk analysis to
individuals and institutions globally. Please visit us for further information.
---

Jan Rasmussen

---

Jan Rasmussen <1@2.3> wrote:

> http://business.timesonline.co.uk/article/0,,13132-2251243,00.html
>
> Thirst for oil fuels China's grand safari in Africa
>
>
http://www.chinadaily.com.cn/bizchina/2006-03/30/content_556103.htm

Guangdong swaps out oil for coal
By Wang Ying (China Daily)
Updated: 2006-03-30 07:02

The China Electricity Council yesterday called for small oil-fired power
plants in South China's Guangdong Province to be replaced with bigger
coal-fired plants.

The council, which brings together the nation's major electricity firms,
made the suggestion in a bid to reduce the country's heavy reliance on
high-priced oil,

Plants with 10 GW (gigawatts) in capacity will be replaced in the
province, while nationwide small coal-fired electricity generators
involving a total capacity of 14 GW will be closed by 2010, in order to
enhance efficiency, Wang Yonggan, secretary-general of the council, told
a meeting on gas power development yesterday.

"China's electricity industry needs to maintain a steady growth, and
small, inefficient coal- and oil-fuelled power generation units should
be phased out to improve the structure of electricity generation
sources," Wang said.

Three coal power plants have been set up in the energy-guzzling
Guangdong Province as substitutes of generation facilities driven by
oil, Wang told China Daily on the sidelines of the summit.

Oil-fuelled power plants make up much of power generation facilities in
Guangdong, but soaring oil prices have put them in the red.

The central government wants to use China's abundant coal resources to
replace oil, of which about 40 per cent is imported.

The nation's top economic policy planner, the National Development and
Reform Commission, on Sunday increased the retailing prices of gasoline
and diesel by 3 to 5 per cent in China to narrow the gap with global
levels.

A Xiamen-based fuel oil trader in East China's Fujian Province, earlier
told China Daily his diesel oil business turned sluggish in the wake of
the oil increase, as his buyers, most of which are coal-fired power
plants couldn't afford the high price.

Wang said coal for the Guangdong power plants would be transported by
rail or shipped in from the coal-rich northern areas.

Meanwhile gas shortage in China, a problem stemming from the high prices
that have delayed the country's overseas purchase of the cleaner fuel,
has left many gas-fuelled power plants idle in the south and east.

By the end of this year, gas power plants in the eastern region with a
capacity of 6 GW will stay unused as a result of gas supply shortfalls,
Wang yesterday said.

"If further gas supply sources could not be secured, the government
should not approve any gas power generation plant in the next five
years," he said.

Wang yesterday also said that coal producers had not inked final
contracts with power firms for this year's coal supplies, mainly due to
"price disputes."

Coal companies are demanding a premium of 15 to 40 yuan (US$1.8 to 4.9)
a ton, much more than power generators could afford, he said.

(China Daily 03/30/2006 page10)

(For more biz stories, please visit Industry Updates)

http://www.chinadaily.com.cn/china/2006-06/12/content_614627.htm

China considers ethanol to supplant oil, coal
(FT.com/chinadaily.com.cn)
Updated: 2006-06-12 15:07

China is considering a change in energy policy to encourage the wider
use of ethanol in a bid to allievate the nation's worsening air
pollution, the website of Financial Times reported on Monday.

The Chinese government policymakers may set a target by the end of this
year for the share of ethanol in the nation's energy mix, Fabrizio
Zichichi, head of ethanol at Noble Group, one of the world's largest
commodities traders, was qouted as saying by the report.

Ethanol, a clean fuel made from agricultural products, not only could
help the country wean itself off its dependence on oil and coal, but a
large ethanol market in China could help spread wealth to the rural
poor, as Brazil has shown, he said.

Zichichi also brushed off criticism that a programme to encourage
farmers to sell their products to ethanol plants would cause food
shortages.

"A higher profit margin could only encourage farmers to raise their
yield," he said. "And the benefits in Brazil have shown that there is
little to fear."

Beijing's move to look closely at ethanol could indicate crucial
political support for investment in the production, import and
distribution of the biofuel in China and could have an impact on world
ethanol prices, according to Financial Times.

China is already the third-largest ethanol producer in the world behind
the US and Brazil, using mainly corn, cassava and sweet potatoes.
Currently, eight of its provinces have made E10, a 10 per cent ethanol
and petroleum blend, mandatory at local petrol pumps.

China's central government has tried for years to popularise the use
environment-friendly fuels, such as natural gas. However, its efforts
have been curtailed by the difficulty of securing supplies and
developing a substantial local market.

Analysts say it is easier to implement an ethanol policy in China by
making E10 mandatory at petrol stations and by encouraging local
production, Financial Times reported.

"There is talk of the National Development and Reform Commission
introducing E10 in three key cities - Beijing, Shanghai and Tianjin,"
Christine Pu, a researcher at Deutsche Securities Asia was quoted as
saying.

She added that there remained a number of barriers to the production of
ethanol in China. Owing to pricing regulations, ethanol producers are
dependent on government subsidies to avoid losses.

http://english.people.com.cn/english/200010/04/eng20001004_51838.html

Liquefied Coal Cuts Oil Need
China plans to launch a coal liquefaction programme in the next five
years to ease the nation's oil shortage.

The State Development Planning Commission is carrying out a feasibility
study on setting up coal liquefaction projects in Yunnan, Shaanxi and
Heilongjiang provinces, according to a senior official with the
commission.

"Experiments have been finished in these three places. The results were
desirable, but we have not located the specific site to launch the
project," said the official.

Analysts predict that total investment for the project will amount to
billions of US dollars with the annual output of 2 or 3 million tons of
oil.

Coal liquefaction is the chemical process of adding hydrogen to coal
under high temperature and pressure to liquefy coal into crude oil.

"Generally speaking, 2 tons of coal can turn out 1 ton of oil,"
explained Shu Geping, a senior engineer of the China Coal Research
Institute.

Given the fact that the total reserves of coal in China far exceed those
of oil, it is desirable to implement the technology to stretch the oil
supply, Shu said.

According to Shu, 20 billion tons of the total proven coal reserves can
be liquefied into 10 billion tons of oil, sufficient for China's
consumption for 50 years.

Thanks to 20 years of hard work and co-operation with developed
countries, China has mastered the technology and can perform the
commercial operation at a desirable cost, said Shu.

With the coal liquefaction technology, producing 1 ton of oil is 30 per
cent cheaper than purchasing oil from the overseas market, Shu added.

"A coal liquefaction manufacturer can recoup their total investment
within 13 years," Shu noted.

The systematic research of the coal liquefaction technology dates back
to 1910. Since then many countries such as Germany, the United States
and Japan have been making great efforts to develop the technology.
However, due to the high cost of coal and labour in developed countries,
this technology has not been commercialized on a large scale.

But South Africa, whose structure of energy reserves is similar to
China's, has established three coal liquefaction manufacturers with
total investment of US$7 billion in 1950. In 1999, these manufacturers
registered a profit before tax of US$610 million.

"If the government can make some preferential policies, such as cutting
down the oil consumption tax and value added tax, coal liquefaction
manufacturers can attain more profits than factories in South Africa,"
Shu said.

China has been a net importer of oil since 1993. It is expected to
import 70 million tons of oil this year. (Source: chinadaily.com.cn)

http://www.gasandoil.com/goc/features/fex43159.htm

Coal-to-liquid fuel offers answer to energy woes

By David Dapice

19-07-04 Amid continuing violence in the Middle East, the issue of
energy security is again on the front burner. With oil prices rising to
a peak of $ 40 a barrel, countries have been looking at alternative
energy with a greater urgency.
This heightened sense of urgency, fortunately, has come at a time when
there is evidence that a new approach using existing resources and
technology can provide alternative energy to many countries.

A glimmer of good news recently appeared: China signed an agreement with
Sasol, a South African energy and chemicals firm, to build two
coal-to-liquid fuel plants in China. These plants, costing $ 3 bn each,
are reported to jointly produce 60 mm tons of liquid fuel (440 mm
barrels) a year. Since China imported 100 mm tons of oil last year,
these plants would give China much control over its domestic energy
situation, though its demand is growing fast. The raw material and
capital costs of a barrel of fuel would fall under $ 10 and other costs
would not bring total costs over $ 15.
Coal resources of 1 tn tons are widely distributed around the world.
Many countries, including China, India, Russia, Ukraine, Germany,
Poland, South Africa, the United States and Australia have extensive
coal deposits that would last 100 years or more at current rates of
exploitation. But coal is a highly polluting fuel when burned directly
and also emits a lot of global-warming carbon dioxide.

The Sasol technology, a third-generation Fischer-Tropsch process, was
developed in Germany and used in World War II, and later in South
Africa. (Steam and oxygen are passed over coke at high temperatures and
pressures; hydrogen and carbon monoxide are produced and then
reassembled into liquid fuels.)
It has long been too expensive to compete with standard crude oil. On
the plus side, sulphur and other pollutants such as ash and mercury are
removed -- the sulphur can be sold as a by-product -- and carbon dioxide
is segregated and can be injected underground. If hydrogen is needed for
fuel cells, these plants can also provide it. In the near term, the
petrol and diesel produced are high grade and clean, meeting even future
'"lean diesel" requirements of the United States.

The real question is if these plants can be built and reliably produce
fuels for less than $ 20 a barrel. Sasol already produces 150,000 bpd
from coal. (Conversion from natural gas is cheaper and Sasol is in the
process of switching its feedstock to gas in South Africa.)
Each of the Chinese plants would be four times as large as the existing
Sasol plant, and scaling up can involve difficulties. If Sasol can make
these larger plants work at the publicised costs, this technology could
be used by many other nations -- rich and poor -- who are willing to
forego periods of very cheap oil for more security. (Indeed, even
oil-producing Indonesia is looking into a coal-to-liquids plant as it
now imports oil.)
This technology also works in converting coal to natural gas at a cost
of $ 3 to $ 3.50 per mm Btu. Since current natural-gas prices in the US
are roughly double that, it would appear that coal-to-gas is also an
economically viable technology.

The coal-to-liquid technology would compete with the evolving tar-sands
technology being expanded in Canada. This technology involves the
production, either by mining or extracting with steam, of heavy oil
trapped in sand. The heavy oil is then massaged into more valuable
fuels. This source already accounts for a quarter of Canada's 3.2 mm bpd
output. It requires natural gas to heat the tar and is energy intensive,
but still has production costs of under $ 20 a barrel.
Tar-sand reserves are estimated at over 250 bn barrels. These and
similar technologies would allow much more plentiful isolated
natural-gas reserves, coal and tar sand to be converted into liquid
fuels. The long-predicted decline in petroleum production could be
delayed for decades or more, and the geopolitics of energy would be
rewritten at something close to or below current crude-oil costs.

Is there a downside to rapidly adopting these technologies? Yes, from a
global welfare perspective. Now, onshore oil-production costs are
usually under $ 5 a barrel. If prices are higher, somebody (the country
owning the oil or the company producing it) gets the difference between
the price and the cost. If we switch to $ 15-$ 20 costs from these other
technologies, then there is no surplus of price over cost, or a much
smaller one.
To use an economic phrase, the "rent" on oil production is destroyed in
a quest for self-sufficiency. While true, the instability in oil prices
-- as well as the threat of terrorist disruptions to supply -- are such
that many nations might be happy to use their own resources to produce
this vital input. They are no worse off if oil can be produced at $ 20 a
barrel, unless the price temporarily plunges below that level as it did
in the late 1990s. A stable price and supply prevents very expensive
disruptions.

None of this answers critics who are properly concerned with global
warming. Subsidies to hybrid or other highly efficient vehicles are
probably needed to reduce emissions. In the longer term, fuel cells
burning hydrogen and producing only water as a waste product are
promising, but still far from being economically feasible.
Overall, the coal-to-liquid technology is only one element of an
integrated programme that is needed to deal with fuel security, local
pollution and global-warming issues. But, even alone, it could bring an
element of stability to world oil prices and thus also to the global
economy. In addition, if it redirects efforts from geopolitical
competition and even conflict to investment and efficiency, it is a
welcome development.

The writer is an associate professor of economics at Tufts University.

Source: Straits Times


http://english.oilnews.com.cn/Info.asp?id=99321

Ã…@Coal Liquefaction to Get Major Investment
Feb 10,2006


Ã…@Ã…@

BEIJING -(Oilnews)- The government plans to heavily invest in coal
liquefaction plants in the next five to 10 years as part of efforts to
reduce its dependence on high-priced oil imports, the China Oilnews
reported Thursday, citing the country??s top economic planning agency.

The government plans to spend US$15 billion to build plants that could
make 16 million tons of oil products from coal, said the newspaper,
citing the National Development and Reform Commission, or NDRC.

The plants will be located in coal-rich Shanxi, Shaanxi and Yunnan
provinces, as well as Inner Mongolia Autonomous Region.

Coal liquefaction is a clean and relatively efficient way of producing
synthetic oil products. Proponents of coal liquefaction say it makes
sense for China to follow this path, given its abundant reserves of
coal, despite the high production costs.

The development of coal liquefaction in China, however, may be affected
by slowing growth in domestic coal output, following government closures
of numerous unsafe mines.

Shanxi, the country??s leading coal-producing province, is set to spend
87 billion yuan (US$10.7 billion) over the next five years to build a
large coal-chemical complex with an annual production capacity of 2.5
million tons of polyvinyl chloride (PVC), 4.5 million tons of carbinol,
10 million tons of carbamide, the China Chemical Industry News reported
Wednesday.

The complex is expected to process 2.55 million tons of coal tar a year.

According to previous reports, Shenhua Group, the nation??s largest coal
producer, is building a 24.5 billion yuan (US$295.9 million) coal
liquefaction plant in Inner Mongolia, the country??s first such plant.

The plant is expected to go into operation in 2007 with an annual output
capacity of 3.2 million tons of oil products.

Source: Shenzhen Daily-Agencies

http://www.china-embassy.org/eng/xw/t235122.htm

China to cut dependence on oil(02/13/06)



The central government is working on a long-term plan to increase
the use of alternative fuels to reduce the dependence on oil.

Coal gas and renewable energy sources such as biomass and solar
power are expected to become "major alternatives," according to the
National Development and Reform Commission (NDRC).

Wu Yin, a senior energy official with NDRC, said at a weekend
meeting that the recommendations of a national leading group from
several cabinet departments are part of an "oil alternative strategy."

He said "the essence of the report" will be incorporated in China's
11th Five-Year Plan (2006-10), which will be discussed at the annual
session of the National People's Congress the supreme legislature next
month.

China aims to raise the ratio of renewable energy in total
consumption to 13 per cent by 2020, up from the current 7 per cent.

Zhang Guobao, vice-minister of the NDRC, said the key to achieve the
goal is to increase the use of nuclear, wind and solar energy so that
dependence on coal and oil could be cut.

The use of renewable energy has been growing at more than 25 per
cent in China the highest in the world and Zhang said solar power
consumption in the country accounted for 40 per cent of the global total
at the end of 2004.

The government has decided to significantly raise the availability
ethanol as vehicle fuel, which is currently being used in five
provinces. Corn, wheat, potatoes and sugarcane are major raw materials
for the alternative fuel.

Given the abundance of reserves in the country, coal liquefaction a
clean and relatively efficient way of producing synthetic products is
also high on the agenda.

China Oil News reported last week that the government plans to spend
US$15 billion to build plants that annually manufacture 16 million tons
of oil products from coal in the next five to 10 years.

The plants will be located in coal-rich Shanxi, Shaanxi and Yunnan
provinces, as well as the Inner Mongolia Autonomous Region.

According to earlier reports, Shenhua Group, the nation's largest
coal producer, is building a 24.5 billion yuan (US$2.96 billion) coal
liquefaction plant in Inner Mongolia, the first of its kind in the
country.

http://www.china-embassy.org/eng/xw/t233673.htm

China's oil consumption, imports decrease in 2005(02/03/06)



China's oil consumption and dependence on imports decreased last year
as a result of the government's energy-saving efforts.

The National Development and Reform Commission said recently that
China's dependence on oil imports was 42.9 per cent in 2005, 2.2
percentage points lower than in 2004. It also said China consumed 318
million tons of oil last year, 1.08 million tons less than in 2004.

"The government's effort at building a resource- and energy-saving
society has paid off," a commission spokesman said.

Lin Yueqin, a researcher with the Chinese Academy of Social
Sciences, attributed the decreased oil consumption and imports to
soaring prices. "High oil prices forced users to consider saving
measures, causing less imported oil."

Prices soared to a high of more than US$70 a barrel last year.

The State Council Development Research Centre, the highest think
tank of the central government, forecast that domestic oil output would
reach 184 million tons this year, which means that 44 per cent of
China's oil demand will come from importation.

Pan Derun, deputy president of China Oil and Chemical Industry
Association, said China would try to double its oil supply to meet its
goal of quadrupling its economy by 2020.

Zhang Guobao, vice-minister of the National Development and Reform
Commission, said China satisfies 94 per cent of its energy needs.

"Most people are not aware that China is also a big energy
exporter," Zhang said.

Besides coal, China is also the top coke exporter in the world,
supplying 56 per cent of the world's total demand in 2004.

Nearly 67 per cent of China's energy need is met by coal. The ratio
of oil in its energy consumption structure is about 24 per cent.

In addition, statistics indicated that the oil import volume of
China, with a population of 1.3 billion, was 117 million tons in 2004.
By comparison, that of the United States was 500 million tons, Japan 200
million tons and Europe 500 million tons.

http://www.miningmx.com/energy/946456.htm



Pat Davies, CEO, Sasol
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» JSE:SASOL LTD:
22650c 0%
Coal can slake China's oil thirst, says Sasol
Allan Seccombe
Posted: Mon, 06 Mar 2006

[miningmx.com] -- SASOL, the world's leading maker of liquid fuel from
coal and gas reckons China's thirst for oil could be quenched through
its coal resources. It expects the oil price to range from $55 to $58 a
barrel up to June.

Sasol makes up to 160,000 barrels of synthetic fuel a day, providing for
28% of South Africa's requirements. It is building two gas-to-liquid
(GTL) plants, one in Qatar and one in Nigeria.

In China, it is holding talks to advance feasibility studies in China
for a coal-to-liquid plant and it is evaluating similar projects in the
United States and India. The world's largest coal deposits are found in
these three countries.

The increased interest shown around the world in the coal-to-liquid
technology could result in massive off take of coal. Sasol uses 45
million tonnes of coal a year and 200 million cubic feet of gas per day
to make 160,000 barrels a day of fuel.

Sasol could build two plants in China that would each use up to 19
million tonnes of coal a year to make 80,000 barrels per day of fuel,
made up of two thirds diesel and 34% naptha and liquid petroleum gas.
Their combined output of 160,000 barrels per day would equal that of
Sasol's South African production.

The projects would cost up to a total $14bn and Sasol would hope to hold
up to a 50% equity position in each.

If 10% of China's coal reserves were converted to oil it would equal the
world's proven crude oil reserves, said Pat Davies, Sasol's CEO.

"China has all the oil it needs in the form of coal," he said.

China has all the oil it needs in the form of coal
Sasol has already produced 1.5 billion barrels of oil in the past
decade. "That places us in a wonderfully sweet spot to supply energy,"
Davies said.

Sasol has benefited immensely from the high oil prices, with its interim
operating profit up 71%.

US light crude for April delivery was trading at $63.48 per barrel by
late afternoon South African time, while Brent crude for the same month
was trading at $63.71.

The price of US crude has jumped about seven percent since mid-February
because of worries about growing tensions in key suppliers like Iran and
Nigeria.

"We still think oil prices will come off… We believe that in this half
we are in now prices will be $55 to $58 a barrel," he said.

"We don't see any major shift that will push the price down. It's a very
complicated story of supply and demand. Iran is playing a factor as are
the upsets in Nigeria," Davies told Miningmx. "These factors tend to
come and go. As some of these geo-political events stabilise a bit the
oil price will nudge down."

Sasol will unveil a second black empowerment deal on its coalmines in
coming months, Davies said.

This is separate from the announcement in May 2004 when Sasol and
Eyesizwe, the largest empowered coal miner, signed a memorandum of
understanding, covering areas of possible cooperation.

"We are close to announcing a deal with Eyesizwe and there will be
another empowerment announcement before year end," Davies said,
declining to give any more details apart from saying details of the
Eyesizwe deal could be released in the next couple of weeks.

Sasol mines 51 million tonnes of coal a year, making it the country's
second largest producer. It exports 3.6 million tonnes of steam coal a
year.

Sasol expects export steam coal prices to rise from the $50 level seen
currently.

"The prices are $49 to $50 a tonne and we expect them to go up
somewhat," said Jannie van der Westhuizen, the Sasol group general
manager.

"There was a very cold winter in Europe and the impression we get is
that the coal users there have left it a bit late to add to their stock
levels. We think they'll have to build their stocks," he said.

"The Russians are the wild card. If prices go lower than $50 they tend
to withdraw. I don't think it will go much higher than $50, but there is
a slight upward trend now and we think it could extend into the next
couple of months," he said.
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The impact on coal prices from increased conversion of oil to fuel is
likely to be minimal, van der Westhuizen said, explaining mines would be
built specifically for conversion plants, which would use a different
quality coal to export-quality coal.

The world has 190 years of coal supply based on current usage rates
compared to 60 years of gas and 40 years of oil supply, according to the
World Coal Institute.

Sasol has some concerns that its coal-to-liquids technology could be
copied in China.

"We are concerned about it, however, the largest challenge is to make
the technology work and deliver value. Sasol has that ability to do that
with parties in China," van der Westhuizen said.




--
Jesper
The saw is family!

---

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