FEATURE - China's Tarim Basin: gushing with oil or just hype?
Date: 11-Dec-03
Country: CHINA
Author: Godwin Chellam
"It's not much, but I make three times more here than I would back home in Sichuan. I wouldn't be here if it wasn't for that, and the Tarim Basin," said the drilling engineer, shuffling about an 80-sq-ft (7.432 sq metre) space containing a bed, table and TV.
The lure of black gold and gas is drawing Jin and thousands like him to China's rugged western region of Xinjiang, specifically to the Tarim Basin, an area the size of France, which Beijing touts as a fount of energy that could wean the country from its Middle Eastern dependence.
But analysts are sceptical.
The basin is expected to spew six million tonnes (120,000 bpd) of crude oil yearly by 2005. Gas output could soar to 12 billion cubic metres versus one billion now, local officials say.
PetroChina Ltd (0857.HK: Quote, Profile, Research) (PTR.N: Quote, Profile, Research) , the country's flagship oil concern, reckons it holds more than 10 billion tonnes of oil and 8.0 trillion cubic metres of natural gas - the world's fourth and third largest caches, respectively.
And its showpiece is a 4,200-km (2,610-mile) West-to-East gas pipeline, an $8-billion trunk that will propel nationwide gas usage.
"The Tarim Basin is very important for the development of China. Despite adverse natural conditions, our crude oil production this year will hit 5.25 million tonnes," said Sun Longde, president of PetroChina's Tarim Oilfield Company.
But that's a mere drop in the ocean for a country that imported 74.15 million tonnes in the first 10 months of 2003, a jump of 30.3 percent from the corresponding period of 2002.
Blistering economic growth of about eight percent a year underpinned incremental Chinese oil demand, with the International Energy Agency saying China's overall demand would grow 443,000 bpd, or nine percent in 2003, followed by another 300,000 bps, or six percent next year."
And Western analysts says the basin's reserves could be as much as 100 times overestimated.
"There could be a bit of misunderstanding because China often looks at in-place reserves rather than those that may be commercially recoverable and actually utilised," said a Beijing-based consultant who did not want to be named.
"I'm not sure how much of an energy hope the Tarim is because of the costs involved. You need large-scale infrastructure like the West-to-East pipeline to actually transport oil and gas to demand centres," the consultant told Reuters.
SHIFTING SANDS
Realising the problem, China launched a project this month to assess oil and gas reserves that will emphasise recoverable reserves versus total reserves assessed during the 1980s and 90s.
But building pipelines to get the oil out won't be easy.
The basin is now accessible by one road, a 522-km (326-mile) Desert Highway completed in 1995 at a cost of more than 700 million yuan ($84 million), which needs constant maintenance to keep back the fast-shifting sands of the Taklamakan desert.
"PetroChina has spent 1.2 billion yuan planting along the highway to stem the desert's flow," said Liu Zhijun, 69, the wizened manager of a botanical research station near Tazhong.
And life in the desert-encrusted basin can be harsh. The temperature in the no-man's land of craggy outcrops and marching sand dunes plummets at nightfall and soars in the day.
"You'd go insane living out here," said Wang Chongming, a foreman at a gas field near Tazhong. "There's no greenery, no entertainment, and sand gets into everything."
Yet many are willing to brave it. China pumped 20.3 million tonnes of crude oil from Xinjiang in 2002, accounting for 12.15 percent of the country's total output in the year.
The basin's oil - lifeblood of an economy that grew 9.1 percent in the year to the third quarter - is envisioned as powering western cities such as Urumqi, while natural gas would feed the energy-hungry eastern economic powerhouses for decades.
And then there's the pipeline. Analysts say the gas
