China seeks new oil suppliers amid Mideast turmoil

President Xi Jinping has penned several major energy deals with Central Asian nations on his ongoing regional tour

Chinese President Xi Jinping (L) speaks at a joint press conference with his Kyrgyz counterpart Almazbek Atambayev (R) during their meeting in Bishkek, Kyrgyzstan, on Sep. 11, 2013.
Vyacheslav Oseledko/AFP/Getty Images

Beijing is digging deeper inroads into alternative oil markets as turmoil in the Middle East threatens a key source of China's international energy supply, industry analysts told Al Jazeera amid President Xi Jinping's whirlwind tour of Central Asia, where he has already penned several multi-billion-dollar energy deals.

Xi agreed Wednesday to disburse $3 billion in credits for energy projects in Kyrgyzstan on his visit to the nation across China's northwestern border. The deal came days after Xi's visit to neighboring Kazakhstan, where he bought 8.33 percent of an offshore oilfield for a whopping $5 billion -- just one in a series of energy deals signed on the trip.

Since the Arab Spring prompted a loss of Chinese investments in the Middle East and North Africa, China has further penetrated markets in Canada -- where a Chinese state-owned company recently purchased a local oil giant -- Latin America and beyond.

Oil from the Middle East and North Africa accounts for roughly 60 percent of China's global imports, as it perpetually endeavors to literally and figuratively fuel its economy. But with smoldering conflict in Syria threatening to boil over into neighboring Saudi Arabia and Iran -- two of China's major regional suppliers – China seems to have doubled efforts to look elsewhere.

China's "energy ministry talks about their vulnerability on that front a lot," said John Kilduff, an energy analyst and founding partner of New York-based investment management company Again Capital. "They're doing everything they can to diversify themselves away from the Middle East."

"A more diversified import portfolio by source can enhance (China's) energy security," said Kevin K. Tsui, a business professor at The Hong Kong Polytechnic University.

It appears Beijing faces a problematic dependence on Middle Eastern oil that is no longer as pressing of a concern for Washington. U.S. domestic production of shale oil and gas has surged in recent years, according to a recent study released by British Petroleum that predicts the U.S. will become entirely "self-sufficient in energy by 2030."

China's economic leaders "see themselves as being as vulnerable as the U.S. used to be," Kilduff said. "As we become more energy self-reliant, the Middle East becomes their problem almost exclusively."

As political upheaval and violence lead China away from its customary oil dealers in the Middle East, it appears Beijing also is attempting to buy a direct hand in international oil production, as opposed to depending on fluctuating imports from the international community. Its new hefty share in Kazakhstan's oilfield is a sign that Beijing is "trying to establish relationships that give the quickest return from inventory," said Phil Flynn, senior energy market analyst at Chicago-based Price Futures Group.

China would rather "own the supply source than (foster individual import) agreements with the producing countries," Kilduff said. "They're taking (their international energies consumption) to the next step, because they are nervous about vulnerability and high reliance on imports."

As much as China may want to re-focus its energy imports on a more stable part of the world, analysts have noted that the infrastructure for greater reliance on Central Asian energies may not yet be in place.

Deborah Brautigam, a prominent voice on China's business partnerships in the developing world, said that "it makes practical and strategic sense for China to expand imports from its neighbors." However, she said, "The Middle East has a very well institutionalized production and distribution system. That's not yet true of all of China's neighbors."

But China is willing to aid in the construction of the proper channels for greater reliance on its regional neighbors. Of the $3 billion deal penned in Kyrgyzstan Wednesday, roughly half will go to the construction of a pipeline that will pump the Central Asian nation's oil directly into China's Far West.

Middle Eastern economies will be impacted if China successfully shifts its dependence on international imports to places like Central Asia.

"Almost every member of OPEC (Organization of the Petroleum Exporting Countries) is counting on China to continue to buy more and more oil," Kilduff said. OPEC countries "are holding their breath to see if China can pull off success with shale oil the way we have."

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