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CHINA:
HUNGRY FOR POWER
Part 3: It is about
oil
By Qiu Xin
Part 1: Hydropower, wave of the future?
Part 2: The human price
HONG KONG -
China's energy crisis caused by shortages of coal and
hydroelectric power is compounded by a worsening oil
shortfall. Though the world's fifth-largest oil
producer, China has fallen from being a net oil importer
in 1993 to becoming the world's fastest-growing
importer. Its estimated exploitable oil reserves would
last about a week.
The energy crisis has sounded
a national alarm, requiring China's leadership to
confront the power famine head-on, review its energy
policies and develop a long-term, sustainable energy
policy.
An abundant energy reserve - or a sound
energy security policy - is a precondition for big-power
status. With its oil reserves virtually non-existent,
its energy security precarious and no coherent energy
policy, China's national security cannot be guaranteed -
let alone its sought-after rising-power status,
according to analysts.
During the extremely cold
weather last October, coal-burning power plants began to
have trouble meeting the growing consumption and demand.
After the central government ordered the suspension or
closure of thousands of small, unsafe mines, seven
provinces have ordered power cuts and blackouts to
guarantee a minimum power supply.
Worse still,
oil is now in short supply and the problem is very
likely to last until the weather warms in the spring,
reducing the need for heating oil, according to Sinopec
Corp, a domestic company engaged in exploration,
production and distribution of oil, gas and related
chemical products.
Although the official media
give few details about the oil shortage, knowledgeable
sources estimate China's maximum exploitable oil
reserves at only 13 billion to 16 billion tons - at best
comparable only to one medium-sized oilfield in Iran.
Most worrisome is that China's current oil reserve is
rated to last the whole country only one week.
Japan isn't much better off - its reserve might
last six months - but Tokyo's strategic energy planners
are far ahead of their Chinese counterparts in making
plans to fill the gap, and the oil gap can have
devastating consequences. When Iran's 1979 Islamic
Revolution triggered the second worldwide oil crisis,
the United States lost about 3.5 percent of its gross
domestic product, while Japan survived, thanks to its
then-sufficient oil reserve.
It is estimated
that China will need 5.8 million barrels of oil a day in
2004, in effect replacing Japan as the world's
second-biggest oil-consuming country, according to
China's official Xinhua news agency. China consumed 250
million tons last year and this year is expected to
consume 300 million tons. The United States consumes 1
billion tons of oil a year.
Oil shortage
could undermine economic growth
China's
inconsequential oil reserve, if not bolstered by
imports, could undermine national economic expansion -
the nation's priority and obsession.
The nation
will need a petroleum reserve of 11 million to 21
million tons in 2010 based on a forecast annual oil
consumption of 270 million to 300 million tons and an
import volume of 100 million to 130 million tons,
according to Chen Huai, vice director of the Research
Institute of Market Economy under the State Council's
Development Research Center. The safety reserve for 90
days should exceed 25 million to 32 million tons, he
said.
Premier Wen Jiabao has urged the
sustainable development and supply of petroleum and
natural gas. At a major Beijing meeting last May 26, he
called for better-developing domestic resources,
building up a strategic reserve and maintaining
petroleum security. A study was launched.
An
oil-focused energy strategy was proposed to the State
Council in late November by its Development Research
Center. It called for establishment of a domestic
petroleum futures market and a related legal and
supervision framework. This would allow China to bridge
its gap with the international energy market, have a
greater say in petroleum pricing, better resist price
fluctuations and secure an oil supply.
The
proposals are under consideration.
The proposed
energy strategy also calls for:
Systematic conservation across various industries
and sectors. Conservation is seldom practiced today.
A flexible strategic petroleum reserve system.
A shortage-warning system with a five-scale
contingency plans for handling shortages that account
for 3, 5, 7, 10 or 15 percent of import volume.
More effective development of domestic energy
resources.
Intensive research into alternative fuels and
resources and more efficient technologies to reduce
reliance on petroleum and coal. These would include
solar, wind, and hydrogen power, among other fuels.
As early as the 1980s, experts warned that
China's inadequate petroleum reserves could not keep up
with demand. Since 1984, the annual growth in petroleum
consumption has averaged 4.9 percent, far outpacing the
yearly growth of 1.7 percent in crude-oil production.
Though the world's No 5 oil producer, China has
transformed from a net oil exporter in 1993 to the
world's fastest-growing importer.
In 2002, the
country's oil output reached 168.9 million tons, while
consumption reached 245.7 million tons, leaving a gap of
76.8 million tons that had to be filled by imports from
the international market.
Slow to embrace oil
market mechanism
Li Peng, premier from 1988-98,
directed the development of the petroleum industry, but
he was slow to embrace the market mechanism, since at
the time Beijing considered petroleum a strategic raw
material. Some critics of China's energy policy - or
lack thereof - hold Li partly responsible for the
current energy crisis.
China has a long way to go
in developing an energy market with a cost-efficient
management system.
During the tenure of Jiang
Zemin, the previous president, China was developing
energy cooperation with Russia and Kazakhstan. Jiang's
big-power diplomacy, however, undermined the plan.
Concerning the proposed Sino-Russian petroleum pipeline
project, Beijing moved slowly and mainly paid lip
service to the project with Moscow, while Japan moved
smoothly and energetically with Russia on its own,
separate pipeline project.
The pipeline and
other setbacks prompted President Hu Jintao to adopt
more pragmatic diplomacy, and his efforts to diversify
energy supply were evident at the Asia-Pacific Economic
Cooperation conference last October in Bangkok. Hu
conferred with Mexican President Vicente Fox on energy
cooperation and later, on his visit to Australia, he
signed a memorandum of understanding for the management
and implementation of the Australia-China Natural Gas
Technology Partnership Fund.
On December 18, Hu
met Israeli President Moshe Katsav in Beijing and they
discussed cooperation in petroleum technology, a field
in which Israel is strong. Hu called cooperation
"reciprocal to both peoples and in accordance with the
interests of both countries".
This is the
final article of this series.
(Copyright
2004 Asia Times Online Co, Ltd. All rights reserved.
Please contact content@atimes.com for
information on our sales and syndication policies.)
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