Oil and Gas in China: The New Energy Superpower’s Relations with Its Region (review)

China’s national oil companies (NOCs) have been making investments in overseas oil and gas assets since 1993. During the 1990s, these investments had only marginal impact on the international petroleum industry or in the diplomatic arena. Since 2004, the scale, scope, and geographic range of these investments have all expanded greatly. Single investments, usually corporate acquisitions, have amounted to several billion dollars. Chinese NOCs are involved in the full range of upstream activities, from onshore to ultra-deep water, and from conventional accumulations to shale gas, oil sands, and coal-bed methane. Their investments are now scattered across more than fifty countries. Since 2009, these NOCs have invested tens of billions of dollars in the Americas alone. Thus, any account that seeks to elaborate on the motivations and significance of China’s extraordinarily rapid engagement in the international oil and gas industry is to be welcomed.

This is the second book of two recently published by Lim Tai Wei. The first, entitled Oil and Gas in China: From Self-Reliance to Internationalization, examined the development of China’s domestic oil and gas industry from 1949 to the late 1970s. This second volume analyzes the impact of the internationalization of China’s oil industry on its neighbors in East, Southeast, and South Asia, drawing on contemporary sources in the relevant countries as well as on scholarly literature. The main focus of the book is on identifying how China’s requirement for oil and gas has affected, or is affecting, its relations with these neighbors, paying particular attention to Japan, Russia, and India.

Chapter 2 describes how China switched its primary oil partnership in northeast Asia from Japan to Russia. For many years, Japan had been a buyer of China’s crude oil, mainly from the Daqing field, and in turn had supplied China with industrial machinery, technology, loans, and investment in a variety of sectors. The Sino-Japanese relationship was crucial to China’s economic development from the late 1970s to the early 1990s. By the mid-1990s, China’s economy was developing strongly, exports were growing, and the country had become a net importer of oil. Thus, it made sense to build a relationship with neighbors that were major potential suppliers of oil, namely Kazakhstan to the west and Russia to the north. At the same time, China cut back on oil exports to Japan. The protracted and convoluted negotiations between Russia and China over oil and gas export pipelines were further complicated in 2002 when the Japanese offered to pay for the cost of an oil pipeline from eastern Siberia to the Sea of Japan.

Chapter 3 looks south to the ASEAN region and documents China’s various initiatives and projects to secure flows of oil and gas along its southern flank. These include the proposed canal or pipeline across the Kra Isthmus in Thailand, the oil and gas pipelines from Myanmar, the use of the Mekong River as a transport route for oil imports, and relations with Brunei and Cambodia. The author argues that ASEAN could provide a framework for building substantial energy trade between Southeast Asia and southern China.

The next two chapters examine a number of sources of conflict in the region arising from China’s growing oil and gas needs. Chapter 4 provides an account of the fluctuating tensions in the East and South China Seas, and their impact on relations between China, on the one hand, and Japan and the ASEAN states, on the other. The growing assertiveness of China in this maritime region and the ongoing expansion of the PLA Navy continue to cause serious concerns among its neighbors. The growing involvement of China, along with Japan and South Korea, in deliberations with ASEAN on a range of issues, including energy and maritime security...