China's Energy Security: Challenges and Opportunities

Article excerpt

China is the world's most populous country and in the last few decades has had the fastest growing economy. In order to meet China's large population's needs and to sustain its economic growth, Beijing has pursued a multi-dimensional strategy. The goal is to ensure sustainable and affordable energy supplies. The rise of China as a major player on the global energy scene has significant geo-political and geo-economic ramifications. This study examines China's efforts to diversify its energy mix and geographical suppliers.

Key words: Oil; Natural gas; Coal; Nuclear power; Strategic petroleum reserve; China's energy policies.

The People's Republic of China (henceforth China) is a major energy consumer. The International Energy Agency highlights some of the main themes of the country's energy outlook. China's primary energy demand is projected to more than double from 1.742 million ton oil equivalent (toe) in 2005 to 3.819 toe in 2030 - an average annual rate of growth of 3.2 percent. China has become the world's largest energy consumer (overtaking the United States) since the beginning of the second decade in the twenty-first century. Oil imports are projected to jump from 3.5 million barrels per day (b/d) in 2006 to 13.1 million b/d in 2030, while the share of imports in demand rises from 50 percent to 80 percent. Natural gas imports also increase quickly, as production growth lags demand. Similarly, China became a net coal importer in 2007. By 2030 coal imports will reach 3 percent of its demand.1

Figures from the British Petroleum's BP Statistical Review of World Energy draw a similar picture. In 2009 proven reserves were 15.5 billion barrels (1.2 percent of world's total), production volume was 3,795 million b/d (4.8 percent) , and consumption level was 7,999 million b/d (9.6 percent). The numbers for natural gas were: proven reserves 2.46 trillion cubic meters (1.3 percent of world's total), production 76.1 billion cubic meters (2.5 percent), and consumption 80.7 billion cubic meters (2.7 percent). The figures for coal were 114,500 million tons (13.9 percent of world's total), 1,414.5 million tons (42.5 percent of world's total) and 1,406.3 million tons (42.6 percent of world's total).2

Finally, the Energy Information Administration sums up China's main energy characteristics: China has emerged from being a net oil exporter in the early 1990s to become the world's third-largest net importer of oil in 2006. Natural gas usage has also increased rapidly in recent years, and China has looked to raise natural gas imports via pipeline and liquefied natural gas (LNG). China is also the world's largest producer and consumer of coal.3

China's huge energy consumption volume can be explained by two major factors - population and economic growth. With a population of approximately 1.4 billion people, China is the most populous country in the world. This population is not only the largest in the world, but equally important, economically China is the fastest growing. Since the late 1970s China's economy has changed from a centrally planned system that was largely closed to international trade to a more market-oriented economy. Reforms started with the phasing out of collectivized agriculture and expanded to include the gradual liberalization of prices, fiscal decentralization, increased autonomy for state enterprises, the foundation of a diversified banking system, the development of stock markets, the rapid growth of the non-state sector, and the opening to foreign trade and investment. As a result, in the last three decades China's economy has been the fastest growing economy in the world and the nation has become the chief economic driver of Asia.

This large and more affluent population, by comparison with earlier, consumes more electricity, lives in bigger homes, buys more appliances, and drives larger cars longer distances. Despite this steady rise in energy consumption, it is important to point out that Chinese energy consumption per capita is considerably lower than that of the United States or Europe. …