A peek into the new era of en­gage­ment her­alded by China's grow­ing in­ter­ests in the Mid­dle East.

Over the last decade, China has sought to safe­guard and di­ver­sify cru­cial en­ergy and com­modi­ties sup­plies needed to sus­tain its long-term eco­nomic growth ce­ment­ing its re­la­tion­ship with the Mid­dle East. From de­vel­op­ing some of the world's big­gest oil fields in Iraq to con­struct­ing a large-scale re­fin­ery at Saudi Ara­bia's Red Sea coast – Chi­nese com­pa­nies are broad­en­ing their foot­print across the re­gion, chan­nel­ing bil­lions of dol­lars into sec­tors such as en­ergy and com­modi­ties.

The en­ergy needs of China and the Mid­dle East re­gion are closely in­ter­twined. On an in­dus­try level, it paves the way for a new breed of Chi­nese en­ergy com­pa­nies – char­ac­terised no longer by low-cost and sub-stan­dard qual­ity and ser­vice of­fer­ings, but by con­sid­er­ably up­graded tech­no­log­i­cal, hu­man and fi­nan­cial ca­pa­bil­i­ties that play a much greater role in a sec­tor that in the past was almost ex­clu­sively dom­i­nated by Western firms, in par­tic­u­lar in­ter­na­tional oil com­pa­nies (IOCs).

On a po­lit­i­cal level, China's deep­en­ing en­gage­ment in the Mid­dle East pro­vides the world's sec­ond-largest econ­omy with long-term ac­cess to strate­gic hy­dro­car­bons and other raw ma­te­ri­als, while at the same time open­ing up down­stream op­por­tu­ni­ties for pro­duc­ing coun­tries seek­ing to ce­ment re­la­tion­ships with their cus­tomers and en­sure long-term de­mand se­cu­rity. It is also strength­en­ing bi­lat­eral re­la­tions be­tween re­gional gov­ern­ments and China, thus adding a new strate­gic di­men­sion to the re­gion's po­lit­i­cal dy­nam­ics that may have greater weight­ing in the af­ter­math of the Arab Spring.

Com­pet­i­tive pos­ture

China's in­creas­ingly com­pet­i­tive pos­ture in the re­gion's en­ergy sec­tor was high­lighted most re­cently by the April an­nounce­ment that state-owned China Na­tional Pe­tro­leum Cor­po­ra­tion (CNPC) had agreed a land­mark deal with Abu Dhabi's gov­ern­ment, grant­ing it ac­cess to pro­duce and ex­port crude oil from sev­eral on­shore and off­shore fields in the emi­rate, the first of its kind for a Chi­nese company in the Gulf state. As China keeps grow­ing, its de­pen­dence on en­ergy im­ports from the West Asia re­gion will con­tinue. As a re­sult, more Chi­nese in­vest­ments are likely to be di­rected at op­por­tu­ni­ties in the Mid­dle East en­ergy sec­tor, whether up-, mid- or down­stream.

China's de­sire to en­sure the se­cu­rity and re­li­a­bil­ity of its in­ter­na­tion­ally-sourced en­ergy and raw ma­te­rial sup­plies is un­der­stand­able con­sid­er­ing that China, which in Septem­ber 2013 be­came the world's largest net im­porter of crude oil and other liq­uids, is pro­jected by the En­ergy In­for­ma­tion Ad­min­is­tra­tion to con­sume more than twice as much en­ergy as the U.S. and more than three times as much as In­dia by 2040. It is driven by a mix of steady eco­nomic growth and rapidly ris­ing pe­tro­leum de­mand that out­paces pro­duc­tion growth in the Asian coun­try, whose pop­u­la­tion will rise to about 1.38 bil­lion by 2015 from an es­ti­mated 1.34 bil­lion in 2010. Ac­cord­ing to Ed­in­burgh-based en­ergy con­sul­tancy Wood Macken­zie, China's thirst for en­ergy means that the coun­try will have to spend as much as $500 bil­lion per year by 2020 on crude oil im­ports alone.

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