China’s Energy Security

Meeting the Demand for the 21st Century

Chris Johnson, Esdras Miranda, Mike Morrissey, Mark Thornton

China’s Background

• Worlds most populous country (1.3 billion)

• 2nd largest energy consumer

• Dominant source of fuel is coal

• Production & consumption of coal is highest in the world

• Becoming more competitive in world oil markets

Global Shares of Energy

0

0.050.1

0.15

0.2

0.250.3

0.35

1985 1990 1995 2000

% o

f w

orl

d's

En

erg

y

coal oil hydro gas

35%

25%

15%

5%

30%

What China will use for Energy in 2007

CoalCoal 69%

Oil 23%

Gas 3.7%

Nuclear 1.2%

Hydro 2.5%

China and Coal

• 65% of primary energy consumption

• Largest producer and consumer in the world

• 2003: coal consumption was 1.53 billion short tons (28% of World)

GDP Compared to Energy

• This Graph demonstrates the energy growth from 2001 to 2004

• China plans on quadrupling its gross domestic product before 2020

• This will not be achieved if energy consumption remains at a higher percentage than GDP

National Ministry of Energy

• Implement comprehensive energy policies

• Increase staffing of government officials in the energy sector

• Include Stakeholders in decision makings of hydro and nuclear power plants

China’s Major Energy Companies

CNPC- China National Petroleum Corporation

specializes in crude oil production

Sinopec- China Petrochemical Corporation

Refining, Distribution

CNOOC- China National Offshore Oil Corporation

Offshore Exploration, Production,

China’s Decision Making

• National Energy Strategy and Policy 2020

• Consider supply & demand of energy consumption

• Create a new energy sector

• National Ministry of Energy

j

China

Mongolia

Kazakhstan RussiaXinjiang

Daqing

East and South

China Sea

Large Coal

DepositsThree Gorges

Dam

China’s Major Domestic Energy Supplies

Nuclear Power Plants

China’s Oil

• 2nd largest consumer of oil products in 2004

• Source of around 40% of world oil demand growth in the last 4 years

• Oil demand estimated to reach 14.2 million bbl/d by 2025

• 85% of oil production is onshore

• Around half of imported oil comes from the Middle East

• Saudi Arabia alone accounted for 17% in first quarter of 2005

China’s Oil Priorities

• Stabilize production in the eastern regions

• Increase production in new western fields

• Develop infrastructure needed to deliver western oil and gas to the east

• Offshore oil development

China’s Oil

Why is obtaining more oil so important for China’s Future?

•Auto Market will be 2nd Largest in the world within the next ten years

23 Million Cars now, 130 million by 2030- That’s 7.5% Growth per year

•If the United States experienced that same rate of growth to its current 140 million car population for the next 25 years, we would have 800,000,000 cars!

Where Does China get it’s oil from now?

46.8%

27.3%

10.7%5.9% 5.3%

0.0%

10.0%

20.0%

30.0%

40.0%

50.0%

MiddleEast

Africa Eurasia Asia LatinAmerica

Sh

are

of C

hin

a's

Oil

Im

por

ts

China’s Energy Routes are Vulnerable

China is looking to the West for Energy

Angarsk-Daqing Pipeline

Turkmenistan-China Natural Gas Pipeline

Kazakhstan-China Pipeline

CNPC strikes deal with Iran

Oman

Yemen

UABEgypt

Saudi Arabia

IraqIran

KuwaitLibya

Algeria

Sudan

Kazakhstan

Uzbekistan

China’s Oil Deals

Strategy Proposal on Demand

• Promote and raise public awareness of energy efficiency

• Introduce fuel taxes and fuel efficiency standards in the transportation sector of the economy

• Establish stricter energy efficiency ordinances for equipment in industrialized buildings

Strategy Proposal on Supply

• Set up Environmentally Friendly Fund in order encourage cleaner coal

• Accelerate natural gas market development

• Accelerate construction of hydro and nuclear power plants

• Institute property rights reform • End price controls and move towards

public bidding and auctions