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07-11-06, 06:48
Xinjiang: the curse of oil
6 November 2006
Economist Intelligence Unit - Business China
Business China
For ethnic minorities in Xinjiang, the region's emergence as China's leading petrochemical centre would hardly be a welcome development
The north-western autonomous region of Xinjiang used to be the most far-flung target of China's “Go West†campaign to develop its poor interior. But now the authorities are looking even further west, beyond the frontier of the Muslim-populated region, to the Central Asian countries in hopes of using their riches to unlock Xinjiang's economic potential.
Because of its position as the natural corridor for any pipeline from the oil-rich Central Asian republics, Xinjiang is being developed as China's top petrochemical-industry hub. As China intensifies its quest to secure and diversify energy supplies for its fast- growing economy, it has announced plans for at least two new oil and gas pipelines from Central Asia and Russia via Xinjiang to China’s major industrial areas.
Big plans
Xinjiang's authorities anticipate this would markedly change the fortunes of their domain. Until concerted exploration of oil and gas reserves in the Tarim Basin started 16 years ago the region primarily depended on agriculture, with cotton-growing as the pillar of the local economy. The Tarim Basin, which lies in the middle of the inhospitable Taklamakan Desert, has been touted for years as the most promising new domestic source of oil and gas reserves. Tarim's significance has only grown in recent years as output from other domestic oil fields like Daqing, which had been pumping oil since the 1950s, declines. PetroChina expects production of its Tarim oil field to rise 50% this year to the equivalent of 15m tonnes of crude, from 10m tonnes in 2005. But in the 21st century Xinjiang is poised to become much more than home to China’s most important hole in the ground. In a press briefing in October in the capital, Urumqi, Wang Lequan, the autonomous region's party secretary, said Xinjiang will emerge as the country's biggest oil, gas and refinery base.
Local minority groups, however, remain deeply sceptical about how the new rhetoric of brighter prospects for the region will improve their economic lot. Indeed, little of the wealth generated by the combined output from Tarim and Karamay—another large oil field—has trickled down to Xinjiang's ethnic minorities. “Wherever there is oil and money you only see Han,†is how one Uygur from Hotan appraises life in Xinjiang today.
Non-Han Chinese like him remember well that of the ten major “Go West†projects the central government originally announced in 1999, only one was Xinjiang-related. It was a 4,200-km pipeline, which begins in the Tarim Basin and crosses six inland provinces before reaching Shanghai. The US$14.5bn project was completed in 2004 and now transports natural gas from Xinjiang to Shanghai and Beijing. Currently, only about 30% of the regional government's revenue is derived from the exploration and processing of oil and natural gas. But with the planned Central Asian and Russian pipelines snaking through Xinjiang, local officials predict that the petrochemical industry will become a much stronger growth engine for the regional economy.
A 598-mile Atasu-Alashankou pipeline completed in December at a cost of US$800m already transports crude oil from neighbouring Kazakhstan to China National Petroleum Corp’s (CNPC) refinery in Dushanzi in north Xinjiang. Another agreement for a pipeline supplying natural gas from Turkmenistan was reached when the Chinese president, Hu Jintao, visited the Central Asian republic earlier this year. The pipeline is projected to carry some 30bn cu metres of gas annually to the western Xinjiang city of Kashgar when it becomes operational in 2009. Also this year, Russia's Gazprom signed a memorandum of understanding with CNPC to build a pipeline that will supply China with 60bn-80bn cu metres of gas within five years. The pipeline will start in Krasnoyarsk in western Siberia and link to the main west-to-east gas pipeline in Xinjiang. The final agreement is expected to be signed by year-end.
While many details of the planned pipelines remain sketchy, locations for eight refinery centres across Xinjiang have been identified. The refinery network would cover not only the region's more industrialised northern part with bases in Dushanzi, Karamay, Urumqi and Turpan, but also the under-developed southern areas where bases would spread from Korla and Kuqa on the northern fringes of Taklamakan Desert to Kashgar and Zepu in the west. When the network is completed, Xinjiang's refining capacity is projected to rise from 16m tonnes of crude this year to 25m tonnes in 2010.
The rising profile of Xinjiang in China's overall energy picture, however, is a mixed blessing for the region's Muslim Uygur population. Above all, it means authorities in Beijing will exert tighter control to ensure energy-transportation security and social stability in this most politically volatile of China's regions (where the country also keeps a large part of its nuclear arsenal). There is bound to be more influx of Han Chinese into the territory, and the already heavy military presence is likely to get heavier still.
While immigration of Han Chinese to the region has fluctuated through the years, since 2005 they have come to dominate its population. Of Xinjiang's 20.1m inhabitants, ethnic Han Chinese now number some 11m. China's attempt to Sinify Xinjiang has long been criticised by international human rights and labour groups. But the global war on terror and fight against Islamic fundamentalism have provided Chinese authorities with internationally sanctioned cover to deploy more police and exercise even tighter control on religious practices.
Palpable resentment
Among Xinjiang's non-Han ethnic groups, resentment of the central government's minority and religious policies is palpable. But it pales in comparison to their prevailing sense of economic marginalisation. Although oil giants like PetroChina assert that 28% of workers in various projects around the region are ethnic minorities, they are hard to spot in the oil and gas fields. What is more, the central government has decentralised agriculture in other provinces, but in Xinjiang farming continues to be administered by the Xinjiang Construction and Production Corp, a huge paramilitary organisation formerly known as “bingtuan†(military corps) that reports directly to the State Council. This body now has a formidable contingent of more than 2m employees, nearly all of them Han Chinese. Their military commander is Mr Wang, the autonomous region's party chief.
The reality of Han Chinese's economic involvement in Xinjiang is perhaps best illustrated by the cross-desert highway built by PetroChina to facilitate the exploration of the Tarim oil fields. It is a technological marvel built on 466 km of shifting sands. Although touted as an infrastructure project aimed at raising local people's living standards, it is badly underused. Why? Because the primary mode of local transportation remains the donkey cart.
SOURCE: Business China
6 November 2006
Economist Intelligence Unit - Business China
Business China
For ethnic minorities in Xinjiang, the region's emergence as China's leading petrochemical centre would hardly be a welcome development
The north-western autonomous region of Xinjiang used to be the most far-flung target of China's “Go West†campaign to develop its poor interior. But now the authorities are looking even further west, beyond the frontier of the Muslim-populated region, to the Central Asian countries in hopes of using their riches to unlock Xinjiang's economic potential.
Because of its position as the natural corridor for any pipeline from the oil-rich Central Asian republics, Xinjiang is being developed as China's top petrochemical-industry hub. As China intensifies its quest to secure and diversify energy supplies for its fast- growing economy, it has announced plans for at least two new oil and gas pipelines from Central Asia and Russia via Xinjiang to China’s major industrial areas.
Big plans
Xinjiang's authorities anticipate this would markedly change the fortunes of their domain. Until concerted exploration of oil and gas reserves in the Tarim Basin started 16 years ago the region primarily depended on agriculture, with cotton-growing as the pillar of the local economy. The Tarim Basin, which lies in the middle of the inhospitable Taklamakan Desert, has been touted for years as the most promising new domestic source of oil and gas reserves. Tarim's significance has only grown in recent years as output from other domestic oil fields like Daqing, which had been pumping oil since the 1950s, declines. PetroChina expects production of its Tarim oil field to rise 50% this year to the equivalent of 15m tonnes of crude, from 10m tonnes in 2005. But in the 21st century Xinjiang is poised to become much more than home to China’s most important hole in the ground. In a press briefing in October in the capital, Urumqi, Wang Lequan, the autonomous region's party secretary, said Xinjiang will emerge as the country's biggest oil, gas and refinery base.
Local minority groups, however, remain deeply sceptical about how the new rhetoric of brighter prospects for the region will improve their economic lot. Indeed, little of the wealth generated by the combined output from Tarim and Karamay—another large oil field—has trickled down to Xinjiang's ethnic minorities. “Wherever there is oil and money you only see Han,†is how one Uygur from Hotan appraises life in Xinjiang today.
Non-Han Chinese like him remember well that of the ten major “Go West†projects the central government originally announced in 1999, only one was Xinjiang-related. It was a 4,200-km pipeline, which begins in the Tarim Basin and crosses six inland provinces before reaching Shanghai. The US$14.5bn project was completed in 2004 and now transports natural gas from Xinjiang to Shanghai and Beijing. Currently, only about 30% of the regional government's revenue is derived from the exploration and processing of oil and natural gas. But with the planned Central Asian and Russian pipelines snaking through Xinjiang, local officials predict that the petrochemical industry will become a much stronger growth engine for the regional economy.
A 598-mile Atasu-Alashankou pipeline completed in December at a cost of US$800m already transports crude oil from neighbouring Kazakhstan to China National Petroleum Corp’s (CNPC) refinery in Dushanzi in north Xinjiang. Another agreement for a pipeline supplying natural gas from Turkmenistan was reached when the Chinese president, Hu Jintao, visited the Central Asian republic earlier this year. The pipeline is projected to carry some 30bn cu metres of gas annually to the western Xinjiang city of Kashgar when it becomes operational in 2009. Also this year, Russia's Gazprom signed a memorandum of understanding with CNPC to build a pipeline that will supply China with 60bn-80bn cu metres of gas within five years. The pipeline will start in Krasnoyarsk in western Siberia and link to the main west-to-east gas pipeline in Xinjiang. The final agreement is expected to be signed by year-end.
While many details of the planned pipelines remain sketchy, locations for eight refinery centres across Xinjiang have been identified. The refinery network would cover not only the region's more industrialised northern part with bases in Dushanzi, Karamay, Urumqi and Turpan, but also the under-developed southern areas where bases would spread from Korla and Kuqa on the northern fringes of Taklamakan Desert to Kashgar and Zepu in the west. When the network is completed, Xinjiang's refining capacity is projected to rise from 16m tonnes of crude this year to 25m tonnes in 2010.
The rising profile of Xinjiang in China's overall energy picture, however, is a mixed blessing for the region's Muslim Uygur population. Above all, it means authorities in Beijing will exert tighter control to ensure energy-transportation security and social stability in this most politically volatile of China's regions (where the country also keeps a large part of its nuclear arsenal). There is bound to be more influx of Han Chinese into the territory, and the already heavy military presence is likely to get heavier still.
While immigration of Han Chinese to the region has fluctuated through the years, since 2005 they have come to dominate its population. Of Xinjiang's 20.1m inhabitants, ethnic Han Chinese now number some 11m. China's attempt to Sinify Xinjiang has long been criticised by international human rights and labour groups. But the global war on terror and fight against Islamic fundamentalism have provided Chinese authorities with internationally sanctioned cover to deploy more police and exercise even tighter control on religious practices.
Palpable resentment
Among Xinjiang's non-Han ethnic groups, resentment of the central government's minority and religious policies is palpable. But it pales in comparison to their prevailing sense of economic marginalisation. Although oil giants like PetroChina assert that 28% of workers in various projects around the region are ethnic minorities, they are hard to spot in the oil and gas fields. What is more, the central government has decentralised agriculture in other provinces, but in Xinjiang farming continues to be administered by the Xinjiang Construction and Production Corp, a huge paramilitary organisation formerly known as “bingtuan†(military corps) that reports directly to the State Council. This body now has a formidable contingent of more than 2m employees, nearly all of them Han Chinese. Their military commander is Mr Wang, the autonomous region's party chief.
The reality of Han Chinese's economic involvement in Xinjiang is perhaps best illustrated by the cross-desert highway built by PetroChina to facilitate the exploration of the Tarim oil fields. It is a technological marvel built on 466 km of shifting sands. Although touted as an infrastructure project aimed at raising local people's living standards, it is badly underused. Why? Because the primary mode of local transportation remains the donkey cart.
SOURCE: Business China