Price surge spurs industry rethink

Beijing, Feb 28

South China Morning Post

Surging world oil prices have brought pain to the energy-hungry mainland, prompting calls to build up strategic fuel stocks and speed up pipeline construction to remote oilfields, according to official media.

The mainland, which despite considerable domestic production became a net oil importer in 1993, is reviewing its energy strategy in light of a recent rise in oil prices to nine-year highs in recent weeks, the China Daily Business Weekly said.

�We cannot accept endlessly rising oil prices on the world market,� the state-run daily quoted an unnamed oil official as saying.

Surging prices would �hamper our economic growth and endanger our energy security�, the official reportedly said.

The mainland, which expects to import 42 million tonnes of crude this year and sees demand rising 4 per cent annually this century, will use a mixture of strategies to secure a stable oil supply, the newspaper said.

Higher prices have renewed an old debate on setting up a strategic petroleum reserve and accelerated development of natural gas and hydropower to reduce oil reliance.

To tap the hard-to-reach reserves in the deserts of remote western regions, the State Development and Planning Commission next month will roll out plans to build more pipelines connecting the oil fields to eastern cities, the daily said.

Mainland oil concerns will increasingly establish ventures in producing countries, it said.

Several overseas ventures of the mainland�s huge state oil concerns have been mired in controversy.

Kazakhstan has warned it could oust the China National Petroleum Corp (CNPC) from the Central Asian state�s troubled Aktobemunaigaz crude production unit in a dispute over the dismissal of 1,200 workers last year.

The two other main components of the 1997 package of CNPC oil investments worth US$9.5 billion, the rehabilitation of Kazakhstan�s Uzen oilfield and an ambitious new oil pipeline east from there to the mainland, are at a standstill.

The United States� Treasury Department has extended economic sanctions against Sudan to a CNPC oil venture in the African country. Sudan is accused of using oil revenues to fuel a civil war and tolerate slavery and violence against minorities.

CNPC has said the sanctions would not affect its operations because it sells no Sudan oil to the US.

But the controversy has forced the firm to drop its Sudan operations from inclusion in a subsidiary which plans to launch an initial public offering.

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