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Chinapost.com: China builds desert highway to tap oil field

Thursday, November 09, 2006  

2006/11/9
By Winnie Zhu SHANGHAI, Bloomberg

China will complete a highway across the world’s biggest sandy desert, near the ancient Silk Road, six months before schedule to tap oil fields in the west of the country and reduce reliance on imports.

The road across the Taklamakan desert, near China’s nuclear bomb test site in Xinjiang, will open in June after 22 months of construction, said Li Lixin, head of the highway project office. The journey for rigs and oil workers from Aksu city in the north to the Tarim Basin in the south, where a third of China’s oil reserves are, will be halved.

China’s second highway across Taklamakan will increase access to the basin, the size of France, for Royal Dutch Shell Plc, Chevron Corp., Total SA and other potential bidders for exploration rights in the area. Dependence on oil imports in the world’s fastest-growing major economy will almost double by 2030, the International Energy Agency predicted Tuesday.

“Poor infrastructure is always a concern for oil developers,” Liu Gu, an oil analyst with Guotai Junan Securities Co., said by telephone. “The investment on this highway is relatively small compared with the huge exploration costs.”

The 560,000-square-kilometer Tarim basin has 520 million metric tons of proven oil reserves, enough to supply China for 1 1/2 years, and 724.1 billion cubic meters of gas, enough for 12 years, based on present consumption, Sun Longde, president of PetroChina Tarim Oilfield Co., a unit of the nation’s largest oil company, told reporters in the Xinjiang city of Kolar.

The basin has estimated reserves totaling 8 billion tons of oil and 10 trillion cubic meters of gas, he said.

PetroChina Co.’s parent, China National Petroleum Corp., plans to offer 12 oil-drilling areas covering a fifth of Tarim to foreign investors because the unit lacks experience and technology to develop desert wells, said Sun Tairong, a director at Tarim Oilfield in an interview.

The new 424-kilometer (263-mile), 797 million yuan (US$101 million) highway will connect Aksu city, on the northern rim of the Tarim Basin, next to mineral-rich Kyrgyzstan, with Hotan in the south.

“It will facilitate the transportation of goods, including energy products,” Li said in an interview at the construction site. “It will reduce the distance between Aksu and Hotan from 1,000 kilometers to between 400 and 500 kilometers.”

The government of Xinjiang, China’s largest province, provided 80 percent of the funding for the road and took bank loans for the remainder, Li said.

The first 567-kilometer, 800 million-yuan highway across Taklamakan was built by China National Petroleum in 1995 to connect Hotan to Karla in Xinjiang, and link up with transport networks in Mongolia.

The road requires constant maintenance to prevent it from being buried under fast-shifting desert sands, adding to development costs, Li said.

A rose willow “defense forest” alongside the highway that helps to keep back the sand cost PetroChina more than 200 million yuan, he said.

China is tapping fields in the remote Tarim Basin as domestic output has failed to keep pace with soaring demand, forcing imports to more than double in a decade.

The nation’s reliance on imports will rise to 77 percent by 2030, Paris-based IEA, which advises 26 industrialized consuming nations, said in its “World Energy Outlook” report Tuesday. China imports about 40 percent of its oil now.

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