The FT 6 Jan. 2010

The Financial Times reported that, "China has signalled its interest in funding part of a multi-billion-dollar Kenyan project to develop a port and transport corridor that could provide a new export route for Chinese oil from Sudan." According to the FT,

Yang Jiechi, China’s foreign minister, said that his government was urging Chinese enterprises to “explore the possibility of co-operation with the Kenyan side on such projects”.

The article also noted that China’s engagement in Africa continued to gather pace in 2009 and that China signed new deals to secure mineral resources and build infrastructure. In November 2009, at a summit China pledged $10bn in fresh low-cost loans over the next 3 years.

The FT also reported that Kenya wants to build a new port and an oil refinery in the popular tourist area of Lamu together with an oil pipeline and road and rail links that would connect it to southern Sudan and Ethiopia.

China

The String of Pearls

It is a truth, overlooked at your peril, that China is steadily building its influence in Africa and the Indian Ocean.

China appears to have two primary objectives:

1. to secure supplies of key natural resources and
2. to develop a network of maritime bases which will enable the PLN to safeguard China's lines of communication.

The String of Pearls is a term used to describe the chain of naval bases that China is creating across the Indian Ocean, from its sources of oil in the Red Sea and the Persian Gulf, these bases are also seen by Indian, China's Asian rival, as a major strategic threat.

The main bases are Gwadar in western Pakistan, the port of Hambantota being constructed in southern Sri Lanka and Kyanukpyu in Myanmar (Burma), facilities are also available in Chittagong, Bangladesh, and on islands off the coast of Myanmar. A main oil pipeline is being constructed from the coast of Myanmar to southern China. India, feels increasingly threatened by these developments.

It is also believed that China is interested in acquiring port facilities at Berbera in Somaliland on the Gulf of Aden. Berbera is a deep water port and is the only sheltered harbour on the south side of the Gulf of Aden; it is of immense strategic importance, especially given the difficulties of using the port of Aden.

The Importance of Sudanese oil

China obtains about one-third of all its energy needs from Africa, with perhaps one-quarter of its African oil imports coming from Sudan. The Sudanese oil is exported from the Marsa al-Bashair terminal, near Port Sudan, the tankers then transit down the Red Sea and through the Bab-el-Mandab straits into the Gulf of Aden.

Somali Oil Reserves

The state-owned China National Offshore Oil Corporation (CNOOC) attempted to acquirean interest in Somalia's potential oil reserves - coming to an agreement in 2007 with Abdullahi Yusuf Ahmed, the then head of the “Transitional Federal Government”. The FT reported 14 July 2007 that "The Chinese state oil giant, CNOOC, has won permission to search for oil in part of Somalia, underlining China's willingness to brave Africa's most volatile regions in its hunt for natural resources." The article noted that Somalia has been out of bounds for US oil companies since early 1990s. But as Barney Jopson noted, "CNOOC has not been deterred and last month [June 2007] met Somali government officials in a Nairobi hotel to hammer out the details of its planned survey work, which is due to begin in September [2007]." CNOOC's deal with Somalia's transitional federal government gave it exploration rights in the north Mudug region, some 500km north-east of Mogadishu.

In the late 1980s Conoco and Phillips held exploration concessions in Somalia. They left Somalia after Mohamed Siad Barre was overthrown in 1991. These earlier concessions did produce surveys and data which suggests that Puntland province - which includes the Mudug region - has the potential to yield 5bn-10bn barrels of oil.

China has also recently approached the government of Somaliland, where earlier surveys also show the possibility of significant oil reserves.

Sudanese Oil

April 1999: The Chinese oil company CNPC completed a crude oil pipeline linking Heglig Oilfield and Sudan Port.. This 1,506 kilometer long pipeline has an annual delivery capacity of 12.5 million tons.

In May 1999 The Heglig Oilfield was became operational with a daily output of 150,000 barrels.

In a statement CNPC said, "On June 26, 2007, CNPC signed a production sharing contract with the Sudanese Government on Block 13. Located in the northern waters and coastal area of the Red Sea, Block 13 covers an area of 38,200 square kilometers, 22,000 square kilometers of which is located in the Red Sea. A joint company has been established by CNPC, Pertamina, Sudapet, Sudan's DINDIR, Nigerian Express and AFRICAENERGY. CNPC, Pertamina and Sudapet are the operators to be engaged in oil and gas exploration."