Critics are eyeing Chinese oil and gas exploration activity around the world, not least in Sudan where, it is claimed, Beijing is ruthlessly exploiting the government’s economic vulnerabilities.
That’s what London-based Al-Sharq al-Awsat newspaper suggested last week, explaining that Beijing is “taking advantage of the large deficit in the Sudanese government’s budget and its need for weapons.”
The paper said Beijing now buys oil from Khartoum “for peanuts” at a mere $13/bbl, adding that this grade of crude-all from Sudan’s southern oil fields-fetches “many times” that price on the international market.
It said China buys two thirds of Sudan’s production of crude oil, but “Khartoum has spent lavishly on the police apparatus, and this has led to a large deficit in its budget.”
Hard to credit
Given the price of oil on the market these days, we find this story hard to credit. After all, Khartoum is in a seller’s market and unlikely to be cash-strapped. If anything, Sudan is doing well out of the oil market, and that is the real cause for concern in some circles.
Sudan’s success, in fact, is the reason why other knives are out for the Chinese. The other knives are largely in the hands of activists who are targeting large investors in publicly listed companies with interests in Sudan-especially oil interests.
For months, an activist coalition, formed to pressure Khartoum to end alleged genocide in Darfur, has been pushing investment funds managers to divest from PetroChina in particular because of its parent company’s oil business in Sudan.
China National Petroleum Corp., PetroChina’s state-owned parent company and the country’s largest oil and gas enterprise, owns 40%-the largest single share-of the Greater Nile Petroleum Operating Co. (GNPOC), which has a hand in much of Sudan’s oil industry.
A little help...
With a little help from GNPOC, Sudan’s oil industry is moving along smartly, too. According to the US Energy Information Administration, Sudan’s oil production has risen steadily since July 1999 when GNPOC completed construction of an export pipeline that carries oil from fields in central Sudan to the Port of Sudan on the Red Sea.
In 2006, Sudan’s crude oil production averaged 414,000 b/d, up 14% from the 363,000 b/d produced in 2005. Still more is expected, with the government saying the country will produce 1 million b/d of oil by yearend 2008.
Given that outlook, one can understand why the activists are targeting PetroChina, apparently with success.
Under pressure from activists, Fidelity, the world’s largest mutual funds company, recently announced it had sold 91% of its American Depository Receipts in PetroChina in this year’s first quarter.
Fidelity did not say why it had sold the shares, but its action will likely embolden activist efforts to increase the pressure on other large foreign investors in the Sudanese oil industry-among them, the Chinese.
