China Begins to Set up Oil Emergency Mechanism

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Last updated at: (Beijing Time) Wednesday, February 26, 2003

China Begins to Set up Oil Emergency Mechanism

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The possible eruption of a new Gulf War will exert little influence on China's oil price if the war is on a small or medium scale, said Zhang Dawei, deputy director of the Strategic Study Center for Petroleum Gas Resources with the Ministry of Land Resources on the very day. China has already begun to set up relevant mechanism to cope with the emergency even if the war is going to be on a large scale.

What we mean a small-scale war, explained Zhang Dawei, refers to that the US shares a common voice with its western allies and is able to persuade the neighboring countries of Iraq to support its military attack on Iraq. And in the meantime to launch attack by taking an appropriate time and avoiding the world peak period of oil consumption it is able to bring down the Saddam Regime in a shorter period of time.

In a small-scale war, said he, even if the oil exportation from Iraq come to a complete standstill the oil price will not see a big fluctuation for the oil exportation from Iraq comes only to 5 percent of the world export volume. And China's importation of crude oil from Iraq comes to around one percent of its total oil importation, amounting to about 700,000 tons. Therefore, a war of a suchlike scale won't serve to exert a great influence on China.

The medium-scale war refers to that the US launches a unilateral blitz attack on Iraq without obtaining the complete support of its allies. In face of the sudden attack it is quite likely to rouse a grab for oil due to the lack of mental preparation in international oil market and this will exert some influence on China during a certain period. However, owing to the short duration of the war and the attack on a small extent the Russia, which is increasing its regulatory capacity of oil supply will make efforts to increase its oil output for stabilizing the market without loosing time. Therefore, we'll see the oil price fluctuate for a period of time and then come to the normal before long.

The so-called large-scale war means that the US launches unilaterally a large-scale military attack on Iraq without persuading its western allies. Under the circumstances, it is extremely easy to stir up a large-scale war in the Middle East with the war fire to spread all over the Gulf Area. And beyond doubt these countries will once again resort to oil as their weapons to resist the US military attack, i.e. they will not only reduce the oil export but quite possible to put a stop to the oil export, thereby causing oil crisis.

Around 60 percent of China's crude oil come from the Middle East and China is lack of emergency mechanism for safety importation of oil and so the emergency case will endanger the oil supply in China.

Nonetheless, said Zhang Dawei, China has begun to put into practice some measures for reducing the losses to the minimum in order to cope with the war on a large scale. First of all, China has begun to carry out a multifarious ways of oil importation, namely to increase the rate of oil import from the relatively stable oil market such as Russia and Southeast Asian Countries on the basis of stabilizing the oil import ratio from the Middle East. Secondly, China has already started to set up emergency mechanism for oil supply as have done in most of the developed countries so as to step up the construction for oil reserve. As learned, the Chinese government has already approved the investment for the construction for reserving oil with the investment for the first phase of project coming to some RMB 14 billion-yuan. And thirdly, the Ministry of Land Resources has defined 10 prospective oil-and-gas fields of strategic importance all over the country, such as those in the area of Songpan - Aba in Sichuan Province and Changtant Basin in Tibet Autonomous Region and so on. And in China, more efforts will be exerted to prospect for oil in these areas.

By People's Daily Online

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