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High oil prices ring alarms in China

BEIJING: Surging world oil prices have brought pain to energy-hungry China, prompting calls to build up strategic fuel stocks and speed up construction of pipelines to remote domestic oilfields, an official newspaper said on Sunday.

China, 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 was quoted as saying.

China, which expects to import 42 million tonnes of crude this year and see demand rise four percent annually this century, will use a mixture of strategies to secure a stable oil supply, the newspaper said.

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

To tap the hard-to-reach reserves locked in the deserts of remote western China, 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.

Overseas, Chinese oil concerns will increasingly establish ventures in producing countries, it said without elaborating.

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

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

Two other main components of 1997 package of CNPC oil investments worth $9.5 billion, the rehabilitation of Kazakhstan's Uzen oilfield and an ambitious new oil pipeline east to China, remain at a standstill.

The U.S. Treasury Department this week extended existing economic sanctions against Sudan to a CNPC oil venture in the African country, which is alleged to use oil revenues to fuel a civil war and tolerate slavery and violence against minorities.

CNPC has said the U.S. sanctions would not affect its operations because it sells no Sudan oil to the United States.

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.-Reuters