China hurrying deal for Iranian oil and gas

China, according to The Washington Post, soon will complete a $100 billion deal with Iran that would permit a Chinese government-owned energy company to lead the way in developing a huge oil field in Iran.

If that happens, the Chinese factor will complicate President George W. Bush’s attempts to isolate Iran and roll back its nuclear program, reports say.

Completion of the Chinese contract would allow China to move forward in its drive to locate and obtain new sources of energy for its rapidly growing economy with its rising demand for oil. It also could undercut U.S. and European efforts to stop Tehran’s nuclear plans, and also may create friction between Beijing and other governments.

A respected financial magazine in Beijing, called Caijing, said last week that a Chinese delegation made up of officials from a top economic policy group—the National Development and Reform Commission—plans to visit Iran next month to finalize the agreement. The deal would give China Petrochemical Corp., also known as Sinopec, clearance to develop the Yadavaran oil field in southern Iran.

The Chinese and Iranian governments hope to reach final agreement in the next few weeks, The Post said, before the possible imposition of sanctions against Iran. A report in the Wall Street Journal attributed that statement to unnamed Iranian government officials. Chinese investment in Iran could be hindered by sanctions.

China and Iran reached a memorandum of understanding in October 2004. It provides a framework pledging that Sinopec will develop the Yadavaran oil field in return for the purchase of 10 million tons of liquefied natural gas yearly for the next 25 years.

Chinese analysts said the deal should be viewed as part of their government’s global drive for new energy sources to power its juggernaut development, which, in recent years, has led Chinese companies to invest in Indonesia, Australia, Venezuela, Sudan and Kazakhstan. China is now in an economic struggle with Japan to gain access to what are believed to be enormous oil fields in Russia.

The speed of the Chinese in trying to conclude an agreement with Iran and start development indicates Beijing’s intent to restrict any U.S.-led move to place sanctions against Iran to halt that country’s nuclear development. Sanctions against Iran, however, are unlikely because China and Russia are almost certain to veto any such move by the U.N. Security Council.

The Post quoted Shen Dingli, international relations expert at Fudan University in Shanghai. “China and Iran appear to be collaborating,” he said, “not only for energy development but also to increase the stakes in case sanctions are imposed. This is a subtle message that even if sanctions are passed, you could have limited sanctions without touching upon oil. China is saying: ‘This is my cheese. Don’t touch.’”

Analysts surmise that the Iranian field may produce as much as 300,000 barrels of oil daily, making it among the larger overseas operations by a Chinese company. Sinopec would hold a 51 percent stake in the project, according to Caijing, while the Oil and Natural Gas Corp. of India would keep 29 percent. The remainder of the project would be distributed among Iranian companies and a few outside investors.

At the same time, in this country, Congress is putting a requirement on the Bush White House to add nearly 300 million barrels of oil to the U.S. strategic reserve. The White House, however, has not included money to buy the oil in the proposed 2007 budget sent to the Hill.

Wide-ranging energy legislation passed last year and signed into law requires the administration to up the capacity of the Strategic Petroleum Reserve to 1 billion barrels of oil from the current 727 million barrels, stored in underground caverns at four locations in Texas and Louisiana.

Mike Ruppert, publisher of From the Wilderness Publications, which has been tracking oil depletion for several years, commented: “The all too obvious problem is that with much of the Gulf’s production still impaired, there’s no place in the world to go to get enough oil to meet daily needs, let alone to refill or increase the size of the SPR. That’s why there’s no money allocated for it. The same can be said of Bush cutting government funds for oil and gas exploration ($50 million). The administration understands that there’s nothing of significance left to find.”

Hence, we now hear Bush saying he wants to reduce America’s dependence on Mideast oil by 75 percent and produce more flex-fuel vehicles, complete with tax breaks. We now see Bush visiting a plant which produces solar panels. Yet at the same time, he has reduced the funding for renewable energy research in the federal budget.

Editor & Publisher Frank Schier contributed to the article.

Editor’s note: Since April 3, 2002, Drs. Bob and Sonia Vogl have been addressing the issue of renewable energy and peak oil in this paper. The Rock River Times has devoted a full page to renewable energy since that time. This paper has been ahead of the rest of the media and the government in advocating renewable energy.

From the Feb. 22-28, 2006, issue

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