With Patrick Crow from Washington, D.C.
A Senate energy committee last week heard a warning: The U.S. must change its trade policies toward China if American firms are to participate in the growing Chinese energy business.
Sen. Bennett Johnston (D-La.), committee chairman, said, "Due to its sheer size, China far outweighs any other country in the world with respect to the potential impact its growth will have on international energy markets and global environmental values."
PRODUCTION SLIPS
Deputy Energy Sec. Bill White pointed out to the committee China became a net oil importer at the end of 1993.
He said, "Official statistics indicate that onshore production fell over the last 2 years, with only production from new fields in the South China Sea preventing an overall production decline. Total output has hovered around 3 million b/d since 1988."
He said China is struggling to prevent oil production from slipping further by using enhanced oil recovery techniques, including chemical injection, at its aging major onshore oil fields - Daqing, Shengli, and Liaohe that account for 80% of total production.
White said the country has been largely unsuccessful at finding new fields.
"Exploration has focused on remote regions of western China, but despite official claims of reserves in that area totaling 350 billion bbl Saudi Arabia holds about 260 billion bbl-the region still lacks sizable proven reserves.
"Even if large reserves are found, significant logistical barriers, including the lack of a pipeline to transport oil to processing centers in eastern China, are likely to delay dramatic production increases before 2000."
White said U.S. companies' expertise likely will allow them to continue to dominate China's market for imported oil and gas exploration and production technologies, including seismic, drilling equipment, and EOR methods.
He said U.S. firms hold 65% of that market, which may be worth $5-8 billion during the next 7 years.
THE BARRIERS
White said domestic firms face a number of U.S.-imposed barriers to trade with China.
The Agency for international Development cannot operate there.
The Trade and Development Agency and the Overseas Private Investment Corp. cannot obligate foreign assistance funds to China without a presidential waiver. The Export-Import Bank has a $50 million loan ceiling. Federal rules limit export of strategic commodities and technologies. And the U.S. reconsiders China's most favored nation tariff status annually due to human rights concerns.
White said, "We need to work hard, within the administration and with China, to eliminate as many of these restrictions as soon as we can."
A U.S.-China commerce and trade meeting planned for Apr. 1314 in Washington will include a subgroup on energy technologies.
Copyright 1994 Oil & Gas Journal. All Rights Reserved.
