5 - Development of China's Petroleum Industry and Its Effect on China-ASEAN Economic Relations

Summary

I. Introduction

China's trade relations with the countries of ASEAN goes back a long time. These relations underwent a critical change in the 1970s and since then bilateral trade has expanded considerably. In 1970, trade values were only US$180 million; by 1980 they had grown to US$1.85 billion, and by 1986 to US$3.35 billion, a more than a seventeen-fold increase over 1970. The variety of commodities traded has grown considerably, with petroleum as one of the important commodities. The proportion of petroleum in this trade is not large, but with the recent growth of the petroleum industry in Brunei and Indonesia, the countries of ASEAN have been closely watching the expansion of China's petroleum industry and its exports. This paper is a study of the development of China's petroleum industry and its effect on economic relations between China and ASEAN.

II. Development of the Petroleum Industry in China

China was one of the earliest countries to discover and use petroleum and natural gas. More than 2,000 years ago, in the Qin and Han Dynasties, oil and gas were found in what are the modern provinces of Gansu, Shaanxi, and Sichuan. The Annals of the Han Dynasty record the existence of an “inflammable stream” near the present-day city of Yan'an, and note that the liquid was used for lamps, lubrication, as an anti-corrosive, and as fuel for boiling bitter to make salt. However, the use of petroleum as a source of industrial energy has a short history of less than a century.

China's modern petroleum industry dates from the end of the nineteenth century. However, the semi-feudal, semi-colonial nature of the society precluded the establishment of a national industry. A few fields were exploited but soon fell into disrepair and near bankruptcy. By 1949, there were only eight outdated oil rigs producing 120,000 tons. China was called an “oil-poor country”.

1. Petroleum Prospecting and Growth

With the founding of the People's Republic of China, (PRC), the petroleum industry began to develop rapidly.