Achieving Energy Security through Cross Border Investments: China's Energy Infrastructure Investments across Russia & Central Asia and Lessons for India

By Kumar, Sunil; Chatnani, Niti Nandini | Academy of Strategic Management Journal, January 1, 2018 | Go to article overview

Achieving Energy Security through Cross Border Investments: China's Energy Infrastructure Investments across Russia & Central Asia and Lessons for India


Kumar, Sunil, Chatnani, Niti Nandini, Academy of Strategic Management Journal


INTRODUCTION

Securing supply of fossil fuels in the form of crude oil and natural gas is an essential component towards achieving energy security. The World Energy Assessment (UNDP) defines energy security as "the continuous availability of energy in varied forms in sufficient quantities at reasonable prices'". Energy security is achieved when a country has stable energy supplies at an affordable price, whether through its own production or through reliable means of import. In this paper, henceforth, crude oil is referred as 'oil' and natural gas as 'gas'.

Meeting the growing energy demands and securing an affordable energy supply for the people remains a major and on-going challenge for any country. Oil alone accounts for one-third of the world's primary energy consumption, exceeding 95 Million Barrels Per Day (MBPD) as per BP Statistical Review of World Energy (2017). Availability of energy resources vis-a-vis demand growth is a serious concern for countries that depend on continued energy supplies from outside. Energy security applies not only to the daily availability of energy for a country to fuel its economic engine, but also to longer-term issues related to where and how the energy will be sourced. Access to global energy resources and infrastructure and availability of energy to end-users broadly defines the contours of an energy security policy.

Uneven distribution of energy resources in the world has led to significant vulnerabilities. For emerging and energy importing giants like China and India, energy security concerns are directly linked to maintaining their economic growth and welfare of the people. Rising energy demand and import dependence impact state policies, reflecting in the race for securing external energy resources and creating energy infrastructure beyond national borders. Threats that energy importers face to energy security include political instability in many energy producing countries, manipulation of energy supplies, competition over energy resources, disturbance to supply infrastructure, natural disasters, funding to some of the foreign countries' dictators, rising terrorism, etc.

Energy availability through new technological developments for alternates and discovery of new sources is a global phenomenon. Yet, a country's energy security mostly relies on country-specific efforts to optimize energy availability, with protection against price fluctuations or concerns for availability of supply. These efforts often lead a country to develop supply side strategies in order to cultivate its own supply sources, explore alternate sources of energy or reach a new equilibrium condition to be insulated from any unforeseen energy supply or price shocks. The new equilibrium could equally entail demand side management through efficiency measures, restrictions on uses, technological advancements, focus on alternate resources etc.

China was a net exporter of oil until 1993. However, in order to make the petroleum resources accessible at all levels of society for its 1.4 billion people and to fuel the country's economic growth, China's energy appetite grew very fast. Between 2000 and 2010, the average growth in Gross Domestic Product (GDP) was around 10% on an annual basis, which demanded the annual growth in primary energy at the rate of more than 9% (Qinyun, 2017). Today, China is the world's largest consumer of primary energy-it is the largest consumer of coal, second largest consumer of oil (after US) and fourth largest user of gas (after US, European Union, Russia) in the world.

Oil is globally traded commodity, transported via pipelines, road tankers, rail tankers and sea route oil tankers. Gas, discovered as a by-product of the oil exploration process, was not easy to transport in the initial years due to technological limitations. So, early gas discoveries were flared off. By 1930, transportation became feasible and gradually more uses of gas were discovered for domestic heating/cooking, industrial application and power generation. …

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