July 1, 2009--Sinopec
Forget Exxon, in the future think Sinopec. The Chinese refining giant which is attempting to buy up as much of Iraq's oil production capacity as they will allow.
On the very day that Iraqis in Fourth of July style celebrated the withdrawal of our troops from visible roles in their cities, in a swank hotel in the Green Zone they held an auction to sell to the highest bidders rights to control various forms of oil production there for the next 20 years. In the good old days, American and British companies would have walked off with rights to these treasures. And for a relative pittance. In fact, many feel that the decision to invade and occupy Iraq was more about securing our access to Iraq's oil than to ferret out weapons of mass destruction, overthrow Saddam Hussein, or bring democracy to the region.
Well, if that's what we were up to, just as we cleared the way for axis of evil member Shia Iran to expand its influence in Iraq, our expenditure of blood and treasure is apparently clearing the way for Chinese oil interests to swoop in and scoop up the spoils. And without the loss of one Chinese life or the expenditure of more than a trillion dollars. They just waited on the sidelines and watched while we got mauled and then waltzed in to pick up the prize. Brilliant. Just brilliant.
See the linked New York Times article for some of the details.
Until the 1990s China was a net exporter of oil, not able to use all it produced. But now China manufactures more cars than the U.S., most of their own use, and their roads are clogged with traffic. And the rest of the industrial part of their economy is booming, even, by comparison to the West, during the worldwide Great Recession. So they not only need the oil they have but are now significant importers. Thus, their petro-adventures in Africa and South America. But these are even more tumultuous regions than the Middle East; and the Chinese, with some of the $2.0 trillion they have in hard currency reserves (mostly U.S. dollars), are on an oil-shopping spree. Mainly for oil fields. Sort of what we and the Brits did back in the day when they and then we were building our empires.
And while they are at it, in spite of—perhaps because of—having all those dollars and worrying about the weakness of the U.S. economy, including our periodic instability, China’s central bank, the not-ironically-named People’s Bank of China, continues to call for the diversification of its foreign exchange reserves. Away from an imbalance in dollar holdings, mainly U.S. treasury bonds, going so far as to continue to call for the development of an international currency other than the dollar that would be a safe “depository of value.”
Now, this is not likely to happen. At least in the short run. China, and other rapidly developing countries are too heavily invested in dollars and the American economy to dump it and us too quickly. But they do have a long, very long history of making and carrying out successful long-term plans. To them a thousand years ago can seem like just yesterday. And remember, the British Pound served the same purpose and had the same power as the dollar not too, too long ago.
Back in Iraq, since the situation there is far from stable, in spite of all the celebrating and festivities—while these were going on suicide bombings and others forms of unrest were increasing—but still the oil auction was held.
But in part because of this instability, the wholesale deterioration of existing oil fields and pipeline infrastructure, the draconian terms of the leases, and the fact that the Iraqis still wanted top dollar, or whatever currency, at the daylong event, which was broadcast live on national television, the government came away with just a single deal from among the six giant oil fields and two gas fields it had put on the block.
The single successful contract went to a joint venture of BP and the, yes, China National Petroleum Corporation for the largest field offered--Rumaila, which has reserves of more than 17 billion barrels.
U.S. oil companies came away with nothing. Over time things will undoubtedly change. As the country hopefully stabilizes, as the global economy freshens, as Chinese and Indian GDP continue to expand, in Iraq, sitting on top of at least 20 percent of the world’s known oil reserves, there will be other opportunities to bid on the remaining assets. You know without my saying what I think will happen.
On the very day that Iraqis in Fourth of July style celebrated the withdrawal of our troops from visible roles in their cities, in a swank hotel in the Green Zone they held an auction to sell to the highest bidders rights to control various forms of oil production there for the next 20 years. In the good old days, American and British companies would have walked off with rights to these treasures. And for a relative pittance. In fact, many feel that the decision to invade and occupy Iraq was more about securing our access to Iraq's oil than to ferret out weapons of mass destruction, overthrow Saddam Hussein, or bring democracy to the region.
Well, if that's what we were up to, just as we cleared the way for axis of evil member Shia Iran to expand its influence in Iraq, our expenditure of blood and treasure is apparently clearing the way for Chinese oil interests to swoop in and scoop up the spoils. And without the loss of one Chinese life or the expenditure of more than a trillion dollars. They just waited on the sidelines and watched while we got mauled and then waltzed in to pick up the prize. Brilliant. Just brilliant.
See the linked New York Times article for some of the details.
Until the 1990s China was a net exporter of oil, not able to use all it produced. But now China manufactures more cars than the U.S., most of their own use, and their roads are clogged with traffic. And the rest of the industrial part of their economy is booming, even, by comparison to the West, during the worldwide Great Recession. So they not only need the oil they have but are now significant importers. Thus, their petro-adventures in Africa and South America. But these are even more tumultuous regions than the Middle East; and the Chinese, with some of the $2.0 trillion they have in hard currency reserves (mostly U.S. dollars), are on an oil-shopping spree. Mainly for oil fields. Sort of what we and the Brits did back in the day when they and then we were building our empires.
And while they are at it, in spite of—perhaps because of—having all those dollars and worrying about the weakness of the U.S. economy, including our periodic instability, China’s central bank, the not-ironically-named People’s Bank of China, continues to call for the diversification of its foreign exchange reserves. Away from an imbalance in dollar holdings, mainly U.S. treasury bonds, going so far as to continue to call for the development of an international currency other than the dollar that would be a safe “depository of value.”
Now, this is not likely to happen. At least in the short run. China, and other rapidly developing countries are too heavily invested in dollars and the American economy to dump it and us too quickly. But they do have a long, very long history of making and carrying out successful long-term plans. To them a thousand years ago can seem like just yesterday. And remember, the British Pound served the same purpose and had the same power as the dollar not too, too long ago.
Back in Iraq, since the situation there is far from stable, in spite of all the celebrating and festivities—while these were going on suicide bombings and others forms of unrest were increasing—but still the oil auction was held.
But in part because of this instability, the wholesale deterioration of existing oil fields and pipeline infrastructure, the draconian terms of the leases, and the fact that the Iraqis still wanted top dollar, or whatever currency, at the daylong event, which was broadcast live on national television, the government came away with just a single deal from among the six giant oil fields and two gas fields it had put on the block.
The single successful contract went to a joint venture of BP and the, yes, China National Petroleum Corporation for the largest field offered--Rumaila, which has reserves of more than 17 billion barrels.
U.S. oil companies came away with nothing. Over time things will undoubtedly change. As the country hopefully stabilizes, as the global economy freshens, as Chinese and Indian GDP continue to expand, in Iraq, sitting on top of at least 20 percent of the world’s known oil reserves, there will be other opportunities to bid on the remaining assets. You know without my saying what I think will happen.
posted by Steven Zwerling at
5:18 AM
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