Pyay, Myanmar: In a steamy jungle clearing in Myanmar, a lone drilling rig topped by limp red flags bears testimony to China’s insatiable thirst for oil.

A century ago, the British firm Burmah Oil made a fortune for its shareholders from oil fields that lie beneath the teak forests and golden-spired Buddhist pagodas of the country formerly known as Burma. In its successor state, Myanmar a military dictatorship under Western economic sanctions there is little hope of striking another gusher, said Ma Guiming, a stocky project leader for China National Petroleum.

”Gou qiang,” Ma said of the search for oil, using a Beijing slang term that literally means it will be chokingly difficult. ”But we have no choice. This is something we have to do.”

As recently as 1992, China was self-sufficient in oil. Today, the world’s most-populous country is importing 40 percent of its needs a figure that will rise to 75 percent by 2025, the U.S. Department of Energy predicts.

Chinese oil consumption has almost quadrupled to 7.4 million barrels a day, making China the No.2 consumer behind the United States, and already ahead of Japan. As demand soars, production at the biggest Chinese oil field, Daqing, is in decline.

”There’s no gentle way of saying this,” said Han Wenke, deputy director of the Energy-Research Institute, an arm of the Chinese planning ministry that is based in Beijing. ”We need to find oil fast.”

In its search, China is scouring the backwaters of the world, from monsoon-lashed Myanmar to the deserts of Iran to the seas off Sudan and North Korea, cutting deals with nations that the United States and many other countries consider pariahs.

Oil diplomacy is putting China on a collision course with the United States and Western Europe, which have imposed sanctions on some of the countries where it is doing business.

A case in point is Iran. The United States and Europe are pushing the United Nations to impose sanctions because of its refusal to suspend uranium enrichment programs. Although China, a permanent member of the Security Council, supported the UN’s demand that Iran curtail the program, it has threatened to veto any measures imposing sanctions.

Around the globe, from Angola to Venezuela, China is locked in competition for oil resources with Western nations and another emerging giant, India.

Jaspal Singh, an adviser to the World Bank based in Washington, compares this struggle with the Great Game: the 19th-century rivalry between the British and Russian empires in Central Asia.

”The world is entering the post, post-Cold War era, where securing a stable energy supply will be the main theme of the Great Game,” he says.

China’s search for oil is driven by its growing economic might. Over the past 28 years, the Chinese economy has grown at an average of 9.7 percent a year; in the quarter ended in June, it grew at 11.3 percent. In the first half of 2006, China imported 522,000 barrels a day from Angola, its largest supplier; 464,000 barrels from Saudi Arabia; and 338,000 barrels each from Iran and Russia.

”I see China and the U.S. coming into conflict over energy in the years ahead,” says Jin Riguang, a Chinese government oil and gas adviser and member of the Standing Committee of the Chinese People’s Political Consultative Conference.

Already last year, U.S. lawmakers cited national security concerns when they rejected an $18.5 billion cash bid by Cnooc, the No.3 Chinese oil company, for Unocal, based in El Segundo, California.

Lawmakers claimed that Cnooc, which is 66 percent state-owned via its parent, China National Offshore Oil, is really the Chinese government, and said that al-lowing it to own Unocal could endanger U.S. oil supplies. Chevron, the No.2 U.S. oil company, eventually bought Unocal for $17.8 billion in cash and stock.

Nowhere is the potential for clashes with the United States more evident than in China’s dealings with Iran. When Mahmoud Ahmadinejad was elected president in June 2005, Hu Jintao, president of China, was among the first to send congratu-lations.
The second-biggest Chinese oil company, China Petrochemical, also known as Sinopec Group, signed a preliminary agreement in 2004 to buy a 51 percent stake in the Yadavaran oil field, located in the Western Kurdistan, Iran.

If completed, the deal would also allow China to buy 150,000 barrels of Iranian crude a day at market rates for 25 years as well as 250 million tons of lique-fied natural gas. China could pay Iran as much as $100 billion for the stake and the purchases of oil and gas over 25 years.

The Iran agreement should give pause to investors in China Petroleum & Chemical, the New York Stock Exchange-listed unit of Sinopec, Green says. ”These are un-stable countries, and if I was a shareholder in Chinese oil companies, I would be asking if it’s worth the risk,” he says.

Many of China’s most controversial oil assets are held by state-owned parent companies, which in turn control the publicly traded companies, allowing U.S. investors to buy shares in companies whose parents are operating where sanctions are in place. The public companies and their parents often have the same slate of senior executives.

China has no option but to deal with regimes that the United States disapproves of, says Guan Bin, an analyst at Merrill Lynch in Beijing.

”China is a late comer to the oil exploration scene, and the choicest, most-productive areas have been taken by the BPs and Shells of this world,” Guan said.

To ensure that they get deals, Chinese companies have been paying premiums for the oil fields and companies they buy, said Jonathan Woetzel, a director at McKinsey in Shanghai. In Nigeria, Cnooc ended up paying $2.7 billion, 19 percent more than it had originally said it would, for an offshore block.

”On average, the country’s national oil companies pay at least 10 percent more for foreign reserves than major international oil companies do,” Woetzel said.