Graduate School of Social Sciences The Sino-Qatari Relations Within the Framework of China’s Energy Supply Security Strategy in the Middle East MSc Political Science: International Relations - Thesis Research Project: The Political Economy of Energy Author: Niccolò Mannari – 11697547 Supervisor: Dr. M. (Mehdi) P. Amineh Second Reader: Dr. R. J. (Robin) Pistorius Amsterdam, The Netherlands June 22nd, 2018 (This page is intentionally left blank) 2 Table of contents Acknowledgements 6 Abstract 7 Maps 8 List of figures 11 List of abbreviations 12 Chapter I: Research Design 15 1.1 Introduction 15 1.2 Literature review 17 1.3 Theoretical and conceptual framework 22 1.4 Outline of the argument and hypothesis 27 1.5 Research method and operationalization 27 1.6 Structure of the work 28 Chapter II: The People’s Republic of China: energy industry, natural gas sector and NOCs 29 2.1 Introduction 29 2.2 Overview of China 29 2.3 Chinese state-business relation 30 2.4 Power and energy sector in China 32 2.4.1 Energy mix 33 2.4.2 Energy situation 35 2.4.3 Natural gas sector focus 38 2.5 Chinese energy policy 42 2.6 State class and NOCs 44 2.7 Conclusion 46 Chapter III: The State of Qatar: power structure, energy sector and Sino-Qatari relations 49 3.1 Introduction 49 3.2 The State of Qatar and its relations with China 49 3.2.1 Power structure in Qatar 49 3.2.2 Energy relations between China and Qatar 52 3.2.3 Diplomatic ties 52 3.2.4 Economic ties 53 3.3 Energy sector in Qatar 56 3.3.1 Overview of the energy sector in Qatar 57 3.3.2 Energy mix and energy situation 58 3.3.3 Qatari gas market and natural gas reserves 59 3.3.4 NOCs and their relationship with the state 63 3.4 Conclusion 63 3 Chapter IV: Chinese presence in the Qatari economy 65 4.1. Introduction 65 4.2 Chinese economic activity in Qatar 65 4.2.1 Trade 65 4.2.2 Chinese involvement in non-energy sectors 68 4.2.3 Chinese NOCs in Qatar 69 4.2.3.1 CNOOC’s 2009-2034 LNG spot trade deal and other activities 69 4.2.3.2 CNPC’s 2011-2036 LNG spot trade deal and other activities 72 4.2.4 Sino-Qatari financial affairs 74 4.3 Security and military cooperation between China and Qatar 76 4.4 Conclusion 77 Chapter V: Qatari domestic challenges and regional geopolitical risks to Chinese supply security in the Peninsula 79 5.1 Introduction 79 5.2 Qatari domestic challenges 79 5.2.1 Political challenges 79 5.2.2 Financial/Economic challenges 80 5.2.3 Societal challenges 81 5.3 MENA/Persian Gulf geopolitical risks 82 5.3.1 The 2017 GCC countries diplomatic crisis 82 5.3.2 Iran-Saudi Arabia conflict 83 5.3.3 The commercial sea route from Qatar to China 84 5.4 Geopolitical economic actors in the Middle East 85 5.5 Conclusion 87 Chapter VI: Conclusions 89 References 95 4 (This page is intentionally left blank) 5 Acknowledgements The journey that brought me to the completion of this thesis was full of wonderful people that helped me go through five months of intensive and hard work. And I want to thank them all in this short, but very important passage. First and foremost, I want to thank my parents Andrea and Cristina for giving me the opportunity to come to Amsterdam and the UvA to enjoy an amazing year. I will never be able to show you how much I appreciate you. I also want to thank my professor, Dr. Mehdi Parvizi Amineh, for his efforts and energy, and for the passion on energy matters that he instilled in me during these eight months together. Then, I want to thank the “China group”, Bart, Jim, Lucas and Niek for their suggestions and constant remarks. In conclusion, I want to thank the people that helped me go through this whole thing with their smiles, jokes, kisses, hugs and opinions: Sebastian, Xiddu, Ella, Pietro, Matilde, Guglielmo and my brother Lorenzo. Thank you all. Niccolò Mannari 21st of June 2018 6 Abstract This thesis sets out to explain the current situation of the Chinese energy supply security strategy in Qatar focusing on the development of the Sino-Qatari relations from 2003 to 2018, as well as analyzing in depth the current liquefied natural gas deals that two of China’s most important national oil companies, CNOOC and CNPC, inked with Qatari counterpart Qatargas in 2009 and 2011. Central in this thesis is the focus on the internationalization of Chinese national oil companies and their ties with the central government of Beijing. This will be done with the help of concepts taken from critical theories in order to shed light on the state-market complex in China, as well as in Qatar. I also found very helpful the resource scarcity model to explain how and why China has to seek outside its national border to secure its energy supplies, crucial to sustain the enormous growth of its economy. I described how the Chinese government system works, how the different agencies and ministries operate with the common goal of pushing China towards a brighter future and a constant economic development, while also establishing diplomatic relations with energy-rich countries like Qatar. Subsequently, I discuss the State of Qatar and how its authoritarian regime controls the oil and gas companies that own the huge natural gas resources the country has. I then delved into the Sino-Qatari relations and their importance for both countries, both strategically and commercially. Additionally, the thesis will analyze the Chinese presence in the Qatari economy in many sectors, from trade to investments, from finance to energy and finally, security. The thesis will conclude with an analysis of the possible threats and risks that Chinese national oil companies might face in Qatar and in the extremely instable Middle East region. Key Words China, Qatar, Energy Supply Security, National Oil Companies, Natural Gas 7 Map 1: China Source: ReliefWeb (2013) 8 Map 2: Qatar Source: ReliefWeb (2013) 9 Map 3: Middle East region and related oil/gas pipelines and fields Source: EIA (2012) 10 List of figures Figure 2.1 Primary energy demand by resource in China 32 Figure 2.2 Comparison China-RotW primary energy demand by fuel and final consumption by sector 35 Figure 2.3 Energy capacity by technology in China (historical and projections) 32 Figure 2.4 Chinese domestic natural gas consumption by end-use in 2015 35 Figure 2.5 Key government bodies overseeing energy issues 39 Figure 3.1 Board seats of Qatar Exchange Listed Companies held by family 49 Figure 3.2 Qatar’s import partners 52 Figure 3.3 Qatar’s export partners 52 Figure 3.4 Top 10 importing countries of Qatari LNG 58 Figure 3.5 Top ten gas projects in Qatar in terms of remaining capex/boe (in US$) 59 Figure 3.6 Qatari gas/oil fields and pipeline system map 60 Figure 4.1 China-Qatar bilateral trade (in billion US$) 65 Figure 4.2 Map of China’s natural gas and LNG receiving terminals 69 Figure 5.1 The “String of Pearls” route and the oil and gas shipping lanes to China 83 11 List of abbreviations AIIB Asian Infrastructure Investment Bank b/d Barrel of oil per Day bcm Billion cubic meters BP British Petroleum BRI Belt and Road Initiative CC Central Committee CCASG Cooperation Council for the Arab States of the Gulf CCP Chinese Communist Party CCPIT China Council for the Promotion of International Trade CDB Chinese Development Bank CHEC China Harbor Engineering Corp. CRCP China Railway Construction Corp. CSCEC China State Construction Engineering Corp. CEO Chief executive officer CIA Central Intelligence Agency CME Coordinated Market Economies CNOOC Chinese National Overseas Oil Company CNPC Chinese National Petroleum Company EIA Energy Information Administration EIU Economist Intelligence Unit EU European Union FDI Foreign Direct Investment FYP Five-Years Plan GECF Gas Exporting Countries Forum GCC Gulf Cooperation Council GDP Gross Domestic Product GHG Greenhouse Gas GTL Gas-to-Liquid ICBC Industrial and Commercial Bank of China IEA International Energy Agency IMF International Monetary Fund IOC International Oil Company IPO Initial Public Offering IR International Relations LME Liberal Market Economies LNG Liquefied Natural Gas LPG Liquefied Petroleum Gas 12 Mbpd Million barrels of oil per day MENA Middle East North Africa Mtoe Millions of Tonnes of Oil Equivalent NEA National Energy Administration NEC National Energy Commission NOC National Oil Company NPC National People’s Congress OBOR One Belt One Road OD Organization Department PSA Public sharing agreement PSC Politburo Standing Committee PNG Piped Natural Gas RCC Renminbi Clearing Center RMB Renminbi QEWC Qatar Electricity and Water Company QIIB Qatar International Islamic Bank QIA Qatar Investment Authority QIIC Qatar Islamic Insurance Company QIPCO Qatar Investment & Projects Development Holding Company QH Qatar Holding QP Qatar Petroleum QSTec Qatar Solar Technology SCO Shanghai Cooperation Organization SOE State Owned Enterprise SASAC State-owned Assets Supervision and Administration Commission SPR Strategic Petroleum Reserve Tcf Trillion cubic feet UAE United Arab Emirates UK United Kingdom UN United Nations US United States (of America) US$ (or USD) United States Dollar VoC Varieties of Capitalism WTO World Trade Organization 13 (This page is intentionally left blank) 14 Chapter I Research Design 1.1 Introduction The aim of this research is to analyse and describe the energy supply security strategy that the People’s Republic of China has developed in the State of Qatar thanks to the activities of its national oil companies, focusing on the supply of natural gas from Qatar to China.