China has signed a major agreement with Saudi Arabian state-owned oil company Saudi Aramco to supply its Yunnan province with oil, which will likely travel through Burma to the southwestern Chinese region.
Aramco is the world’s most valuable company, worth somewhere between $US2.2 trillion to $US7 trillion. It announced the signing of the memorandum of understanding (MOU) with PetroChina Company Ltd., a subsidiary of China’s state-owned oil giant China National Petroluem Company (CNPC), to supply some 200,000 barrels of oil a day to the proposed Yunnan refinery that will serve as the endpoint of the trans-Burma Shwe pipeline.
The deal represents a new and very important strategic relationship between the world’s second top oil producer and what is becoming one of the top consumers that was underscored by Khalid A. Al-Falih, president and CEO of Aramco, in its press release:
“We don’t consider ourselves simply sellers of oil to China, but rather strategic partners whose many relationships in that important country are founded on mutual respect, interdependence and mutual benefit.”
That the relationship will hinge on Burma also underscores the importance of the Shwe gas pipeline to the Chinese, with Reuters noting that “This pipeline would make the Saudi crude very competitive because it would slash the journey time through the congested Malacca Strait that links Asia with the Middle East.”
Despite the importance and scale of the economics involved, Wong Aung of the campaign group Shwe Gas Movement (SGM) estimates that as many as 15,000 people will lose their land and livelihoods, often without any compensation.
With a barrel of oil currently trading at over $US100, this makes the daily crude delivery of the Shwe pipeline worth some $US20 million in Saudi oil alone, which is roughly equivalent to four months worth of Burmese government expenditure on health moving through the country in a single day.
Although Russia is by a whisker the world’s top producer of oil, Saudi Arabia is thought to possess the largest provable reserves of crude and as a result has received protection and patronage from the United States, despite it being regarded as one of the most repressive regimes, with sentences for “drunkenness” often including amputations.
That relationship extended to the largest recorded arms sale last year, which according to The Economist was worth up to $US90 billion. The deal included sophisticated weapons systems, including the F-15 fighter jet, apache helicopters, air defences and other equipment. The Saudi military was recently deployed in neighbouring Bahrain to suppress popular pro-democracy protests there. Bahrain houses the US fifth fleet and is a key strategic ally of both the US and Saudi Arabia.