Tag Archives: global oil chokepoints

Climate Change Can Wait: China’s Greed for Oil

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China’s thirst for oil drove global demand for decades…Chinese officials have long worried that the U.S. and its allies could hamstring the nation’s economy by choking off its supply of foreign oil. So China has poured hundreds of billions of dollars into weaning itself off the imported stuff by reviving domestic production and swiftly building the world’s leading electric-vehicle industry. “The energy rice bowl must be held in our own hands,” Chinese leader Xi Jinping has said.

In a remote corner of China. the Tarim Basin, called the “sea of death” for its harsh conditions, oil workers are trying to coax more crude out of the ground by drilling holes as deep as Mt. Everest is high. State-owned PetroChina reported $38 billion of capital expenditures in 2024, nearly as much as Exxon Mobil’s and Chevron’s combined. China’s desire for energy independence dates all the way back to former leader Mao Zedong, who once dispatched tens of thousands of workers to search for oil in China’s northeast to ensure China wouldn’t be dependent on imports…

In July 2018, Xi personally ordered state-owned companies to revive domestic oil production to safeguard national security. Three state-owned oil majors invested an additional $10 billion the following year in exploration and production. They zeroed in on offshore areas such as the South China Sea and the Bohai Sea off the country’s northeast coast, as well as remote reserves near China’s western border with Kyrgyzstan, in a region called the Tarim Basin…

In the deserts of the Tarim Basin crews are exploring some of the nation’s deepest reserves. Summer temperatures can top 120 degrees, and in the winter they can hit minus 20. Such ultradeep exploration is expensive, with some wells costing three times as much as shallower traditional wells, a Chinese oil executive told state media.  In 2023, Xi held a video call with Tarim Basin oil workers, praising their “indispensable contributions” to the nation. About 5% of China’s total oil and gas output in 2024 came from the basin’s deep reservoirs, a number Chinese oil executives intend to increase.

As of May 2024, PetroChina’s parent company, China National Petroleum, said it had drilled 193 wells in the Tarim Oilfield at least 5 miles deep. In the U.S., many wells are a mile or two deep.

Excerpt from Brian Spegele, How China Curbed Its Oil Addiction—and Blunted a U.S. Pressure Point, WSJ, July 21,2025

Who Terrifies an American President?

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Though tensions between Iran and the U.S. have ratcheted up since the Oct. 7, 2024 attacks on Israel by Tehran-backed Hamas, exports from Iran surpassed 1.5 million barrels a day in 2024 starting in February, substantially more than at the start of the Biden presidency. Most of that oil is bought by small Chinese refineries at discounted prices. The U.S. and its allies have been “very, very careful not to go too far and damage the ability of Western economies to function,” when it comes to sanctions, said John Smith, partner at Morrison Foerster and former head of the U.S. Treasury Department’s Office of Foreign Assets Control.

U.S. diplomats and energy officials have for decades worked around the globe to keep oil flowing, often involving uncomfortable alliances and accommodations. When the Treasury department hit Moscow with a wave of sanctions on June 12, 2024 over the Ukraine war, it targeted banks but left the country’s oil industry largely untouched. There is frustration among some staffers in the U.S. Treasury Department over the lack of action against oil-trading networks that ferry Russian and Iranian oil, including one that officials are currently investigating, according to U.S. diplomats and some of the energy-industry players briefed by current officials. The network is operated by a little-known trader from Azerbaijan who emerged as the premier middleman for Russia’s Rosneft Oil, The Wall Street Journal reported.

When the Treasury imposed sanctions on Russia’s state tanker owner, Sovcomflot, it also issued licenses exempting all but 14 of the company’s fleet, which data provider Kpler estimates totals 91 ships. Industry players said the exemption licenses were a green light to oil traders to do business with those ships, minimizing the risk that they would be targeted by future sanctions. The National Economic Council, led by Lael Brainard, and others within the administration worried that broader measures would lead to logistical problems in the oil market and boost inflation, said people familiar with the matter. Rising oil output from sanctioned countries is one reason crude prices have fallen from their highs earlier this year, analysts said…

In another example of the collision of foreign and energy policies, earlier this year, Washington asked Ukraine to stop attacking some Russian refineries with drones after the damage rattled global diesel and gasoline markets….

“Nothing terrifies an American president more than a gasoline-pump price spike,” said Bob McNally, president of consulting firm Rapidan Energy Group and former White House policy official under George W. Bush. “They will go to great lengths to prevent this, especially in an election year.”

Excerpts from Anna Hirtenstein et al., Biden Wants to Be Tough With Russia and Iran—but Wants Low Gas Prices Too, WSJ, June 26, 2024

 

Global Oil Chokepoints and War in Yemen

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Fighters from Yemen’s Houthi militia entered  on March 31, 2015 a coastal military base overlooking the Red Sea’s strategic Bab el-Mandeb strait, local officials told Reuters.  Soldiers of the 17th Armored Division in the Dabab district in Yemen’s southwestern Taiz province opened the gates to the Houthis, whose military advance has been challenged by six days of Saudi-led air strikes. This means that Houthi rebels have a foothold along one of the world’s crucial oil chokepoints.    According to the US Energy Information Administration’s (EIA) fact-sheet on global oil chokepoints, 3.8 million barrels of oil and “refined petroleum products” passed through the Bab el-Mandeb each day on its way to Europe, Asia, and the US, making it the world’s fourth-busiest chokepoint.  The strait controls access to multiple oil terminals and to a oil pipeline co-owned by state companies from Egypt, Saudi Arabia, the United Arab Emirates and Qatar that transits oil between the Red Sea and the Mediterranean Sea, called the Suez-Mediterranean or SUMED pipeline.  The Bab el-Mandeb is 18 miles wide at its narrowest point, “limiting tanker traffic to two 2-mile-wide channels for inbound and outbound shipments,” according to the Energy Information Administration.

“Closure of the Bab el-Mandeb could keep tankers from the Persian Gulf from reaching the Suez Canal or SUMED Pipeline, diverting them around the southern tip of Africa, adding to transit time and cost,” the EIA fact-sheet explains. “In addition, European and North African southbound oil flows could no longer take the most direct route to Asian markets via the Suez Canal and Bab el-Mandeb.”

Recent events in Yemen, where a Saudi-led Arab military coalition is fighting to restore president Abd Rabbu Mansur Hadi against an Iranian-backed insurgent movement, have already jolted global oil prices.

Excerpt from ARMIN ROSEN,  Iran-backed Houthi militants in Yemen just captured a military base along one of the world’s major oil lanes, Reuters, Mar. 31, 2015

More from wikipedia: On February 22, 2008, it was revealed that a company owned by Tarek bin Laden is planning to build a bridge  across the Bab el-Mandeb strait, linking Yemen with Djibouti.  Middle East Development LLC, a Dubai company owned by Tarek bin Laden, would build the bridge. The project has been assigned to engineering company COWI in collaboration with architect studio Dissing+Weitling, both from Denmark.