- Environment and Pollution
According to the Oil and Gas Journal, Saudi Arabia contains 261.9 billion barrels of proven oil reserves, around one-fourth of proven, conventional world oil reserves. Around two-thirds of Saudi reserves are considered light or extra light grades of oil, with the rest either medium or heavy. Although Saudi Arabia has around 80 oil and gas fields (and over 1,000 wells), more than half of its oil reserves are contained in only eight fields, including Ghawar (the worlds largest oil field, with estimated remaining reserves of 70 billion barrels) and Safaniya. Ghawars main producing structures are, from north to south: Ain Dar, Shedgum, Uthmaniyah, Hawiyah, and Haradh. Ghawar alone accounts for about half of Saudi Arabias total oil production capacity.Saudi Arabia is the worlds leading oil producer and exporter, and its location in the politically volatile Gulf region adds an element of concern for its major customers, including the United States. Saudi Arabia maintains crude oil production capacity of around 10.5-11.0 million bbl/d, and claims that it is easily capable of producing up to 15 million bbl/d in the future and maintaining that production level for 50 years. In June 2005, Saudi Aramcos senior vice president of gas operations, Khalid al-Falih, stated that Saudi Arabia would raise production capacity to more than 12 million bbl/d by 2009, and then possibly to 15 million bbl/d if the market situation justifies it. Falih added that by 2006, Saudi Arabia would have 90 drilling rigs in the Kingdom, more than double the number of rigs operating in 2004. One challenge for the Saudis in achieving this objective is that their existing fields sustain 5 percent-12 percent annual decline rates, meaning that the country needs around 500,000-1 million bbl/d in new capacity each year just to compensate. Aramco estimates that the average total depletion for Saudi oil fields is 28 percent, with the giant Ghawar field having produced 48 percent of its proved reserves. Aramco also claims that, if anything, Saudi oil reserves are underestimated, not overestimated. Some outside analysts, notably Matthew Simmons of Houston-based Simmons and Company International, have disputed Aramcos optimistic assessments of Saudi oil reserves and future production, pointing to -- among other things -- more rapid depletion rates and a higher water cut than the Saudis report.
With one-fourth of the worlds proven oil reserves and some of the lowest production costs, Saudi Arabia is likely to remain the worlds largest net oil exporter for the foreseeable future. During January-May 2005, Saudi Arabia supplied the United States with 1.5 million barrels per day of crude oil, or 15%, of U.S. crude oil imports during that period.With oil export revenues making up around 90-95 percent of total Saudi export earnings, 70-80 percent of state revenues, and around 40 percent of the countrys gross domestic product (GDP), Saudi Arabias economy remains, despite attempts at diversification, heavily dependent on oil (although investments in petrochemicals have increased the relative importance of the downstream petroleum sector in recent years). The combination of relatively high oil prices and exports led to a revenues windfall for Saudi Arabia during 2004 and early 2005. For 2004 as a whole, Saudi Arabia earned about $116 billion in net oil export revenues, up 35 percent from 2003 revenue levels. Saudi net oil export revenues are forecast to increase in 2005 and 2006, to $150 billion and $154 billion, respectively, mainly due to higher oil prices. Increased oil prices -- and revenues -- since the price collapse of 1998 have significantly improved Saudi Arabias economic situation, with real GDP growth of 5.2 percent in 2004, and forecasts of 5.7 percent and 4.8 percent growth for 2005 and 2006, respectively. For fiscal year 2004, Saudi Arabia originally had been expecting a budget deficit. However, this was based on an extremely conservative price assumption of $19 per barrel for Saudi oil -- and assumed production of 7.7 million bbl/d. Both of these estimates turned out to be far below actual levels. As a result, as of mid-December 2004, the Saudi Finance Ministry was expecting a huge budget surplus of $26.1 billion, on budget revenues of $104.8 billion (nearly double the countrys original estimate) and expenditures of $78.6 billion (28 percent above the approved budget levels). This surplus is being used for several purposes, including: paying down the Kingdoms public debt; extra spending on education and development projects; increased security expenditures due to threats from terrorists; and higher payments to Saudi citizens through subsidies. For 2005, Saudi Arabia is assuming a balanced budget, with revenues and expenditures of $74.6 billion each.
In addition to expanding upon the domestic pipeline infrastructure, China is looking to establish transnational natural gas pipelines with several neighboring countries. In February 2005, Kazakhstans state-owned KazMunaiGas (KMG) was reportedly conducting a feasibility study of a natural gas pipeline to China in partnership with CNPC. If such a pipeline were built, KMG officials have said that it could be operational by as early as 2009 and also supply natural gas from Turkmenistan and Uzbekistan. Another proposed international pipeline project would link the Russian natural gas grid in Siberia to China, and possibly South Korea, via a pipeline from the Kovykta natural gas fields near Irkutsk. The cost of the project has been estimated at $12 billion with a total planned capacity of 2.9 Bcf/d, of which China would consume 1.9 Bcf/d and Kogas, South Koreas main natural gas company, would consume 1 Bcf/d. Both CNPC and Kogas signed letters of intent for the project in November 2003, although several independent analysts have expressed doubts that the project will come to fruition. During talks between Russian President Putin and Hu Jintao in April 2006, the two leaders reportedly agreed to move ahead with the proposed Kovykta pipeline by 2011, although as of July 2006, no formal decision has been made on whether or not to proceed with the project.
Historically, natural gas has not been a major fuel in China, but its share in the countrys energy mix is increasing. Oil & Gas Journal (OGJ) estimates that Chinas domestic proven reserves of natural gas stood at 53.3 trillion cubic feet (Tcf) as of January 2006. Other sources have put reserves much higher. Cedigaz estimates that China held 83 Tcf of proved natural gas reserves as of January 2006. EIA figures show that China consumed 1.3 Tcf of natural gas in 2004, almost doubling the level of natural gas consumption from five years prior. In 2004, natural gas accounted for only around 3 percent of total energy consumption in China, although this figure is expected to rise in the coming years. Until recently, natural gas was used primarily as a feedstock in chemical fertilizer production and an energy source at oil and gas fields.
According to OGJ, China had 6.2 Mmbbl/d of crude oil refining capacity as of January 2006. Sinopec and CNPC are the two dominant players in Chinas oil refining sector. The expansive sector is undergoing modernization and consolidation, with dozens of small refineries shut down in recent years and larger refineries expanding and upgrading their existing facilities. Domestic price regulations for finished petroleum products have hurt Chinese refiners because of the large difference between current high international oil prices and low domestic rates. According to the BP Statistical Review of World Energy, refinery utilization in China increased from 67 percent in 1998 to 94 percent in 2004. As China seeks to bring additional refining facilities online to meet growing demand for finished petroleum products, BP forecasts that the country will increase refining capacity by 1.8 Mmbbl/d between 2004 and 2008, a 32 percent increase in total capacity.
China has a large expanse of domestic oil pipelines, although the large national oil companies are working to establish a more integrated and complete oil pipeline network to better satisfy growing demand. CNPCs PetroChina currently owns and operates more than 6,000 miles of crude oil pipelines and more than 1,200 miles of refined product pipelines, with plans to build several new systems in the coming years. In 2005, less than half of the crude oil transported domestically by CNPC traveled via pipeline, while the rest typically traveled by rail. Among other plans, in January 2006 PetroChina received government approval for two trans-China pipelines. One will start from Lanzhou, in northwest Chinas Gansu province, with a capacity of 160,000 bbl/d and the second will begin at Jinzhou, in the northeastern Liaoning province, with a capacity of 80,000 bbl/d. Both pipelines will converge in Zhengzhou in central Henan province with a total projected cost of $1.5 billion. PetroChina also hopes to begin operations in August 2006 at a new, 1,200-mile pipeline bringing 400,000 bbl/d of crude oil from Urumqi in the Xinjiang Uygur Autonomous Region in the west to Lanzhou. Sinopec, Chinas largest oil refiner, is also actively expanding its pipeline network. In June 2006, the company announced plans to construct a 140-mile crude pipeline connecting its storage terminals at Tianjins Nanjiang port with its petrochemical complex in Beijing. In October 2004, Sinopec began constructing a 600-mile crude oil pipeline that will eventually connect Yizheng with Changling. The first phase of the project, which connects Yizheng and Jiujiang, began operations in May 2006. Once completed, the final pipeline is expected to supply 540,000 bbl/d of oil to Sinopecs five refineries along the Yangtze River. It will also link up with Sinopecs pipeline network in northeastern China.
Recent oil exploration efforts have centered on developing onshore oil and natural gas fields in the western provinces of Xinjiang, Sichuan, Gansu, and Inner Mongolia as well as offshore fields in the Bohai Bay, Pearl River Delta, and South China Sea. In July 2006, PetroChina announced that it would open nine blocks in the Tarim basin in northwestern Chinas Xinjiang Uygur Autonomous Region for foreign companies to explore. The nine blocks cover more than 42,000 square miles and according to CNPC hold an estimated 43.9 billion barrels of potential oil reserves. Despite the lure of large potential reserves, previous bidding rounds in the Tarim basin received a tepid response from foreign companies, because potential bidders thought that its remote location and difficult geological structures would make exploration and development difficult.
According to Oil & Gas Journal (OGJ), China had 18.3 billion barrels of proven oil reserves as of January 2006, flat from the previous year. EIA estimates that China will produce 3.8 million barrels per day (Mmbbl/d) of oil in 2006, slightly higher than the previous year. Of this, 96 percent is expected to be crude oil. EIA estimates that China will consume 7.4 Mmbbl/d of oil in 2006, representing nearly a half million barrels per day increase from 2005. For 2006, EIA data forecasts that Chinas increase in oil demand will represent 38 percent of the world total increase in demand.
The Peoples Republic of China (China) is the worlds most populous country and the second largest energy consumer behind the United States. Rising oil demand and imports have made China a significant factor in world oil markets, is the worlds second-largest consumer of oil behind the United States, and the third-largest net importer of oil after the U.S. and Japan. China also produces a significant amount of oil and contains sizeable proven oil reserves. Chinas largest oil producing fields are mature and production has peaked, leading oil exploration activities to focus on developing largely untapped reserves in the western interior provinces and offshore fields. Much attention has been given to Chinas national oil companies investing in oil exploration and production assets overseas. However, so far these acquisitions have contributed relatively little to Chinas oil imports. China inaugurated its first transnational oil pipeline in May 2006 when it began receiving Kazakh and Russian oil from a pipeline originating in Kazakhstan. Recent attention has been given to building new facilities and upgrading existing plants so they can process heavier and sourer grades of crude oil from Middle Eastern countries. In 2004, natural gas accounted for only 3 percent of Chinas energy consumption. However, natural gas production and consumption is expected to rise in the coming years. China is the largest producer and consumer of coal in the world, and many of Chinas large coal reserves have yet to be developed. Chinas electricity generation continues to be dominated by fossil fuel sources, particularly coal. The Chinese government has made the expansion of natural gas-fired power plants a priority. China is currently building the Three Gorges Dam hydroelectric facility, which, when completed in 2009, will be the largest hydroelectric project in the world. China is the worlds second-largest source of carbon dioxide emissions.
Chile has recoverable coal reserves of 1,300 million short tons (Mmst). In 2003, the country consumed 4.4 Mmst while producing 0.5 Mmst. Domestic coal production is located in the Lota/Coronel area and in the extreme south on Tierra del Fuego. The country has two mines, operated by Empresa Nacional del Carbon (Enacar) and La Compania Carbonifera San Pedro de Catamutun (CCSPC), respectively. The level of coal consumption has tended to fluctuate, as the power sector, the countrys largest coal consumer, uses the fuel largely as a back up to hydropower. In 2004, most imports came from Australia, followed by Indonesia and Colombia.