Auto boom worsens China's energy
crunch By Wu Zhong, China
Editor
HONG KONG - Rapid
industrialization, urbanization and enormous
increases in the country's motor-vehicle fleet are
the major factors boosting China's growing demand
for energy, posing a serious challenge to
Beijing's energy strategy. These key points
emerged from remarks made by Feng Fei, a senior
official with the Development Research Center of
the State Council, a top Chinese government
think-tank.
China's economy has undertaken
a dramatic restructuring due to its high-speed
development. The restructuring is characterized by
rapid industrialization, which now has entered its
final phase. Last year, the output of heavy
industry accounted for 69% of China's total
industrial output, Feng said at a forum in Beijing on Thursday.
Urbanization has also accelerated. At
present, some 15 million
rural residents settle down
in China's cities each year. At this pace, the
country's rate of urbanization will reach 55-60%
by 2020. That means up to 60% of its projected 1.5
billion 2020 population, or 900 million people,
will live in cities. Currently, only about 30% of
the 1.3 billion Chinese population dwell in cities
- about 390 million people. Normally, the average
per capita energy consumption of urban citizens is
3.5 times that of rural residents. Therefore, the
demand of energy will steadily grow with the pace
of urbanization.
Furthermore, energy
demand in China is and will be boosted by the
sharply growing number of cars. As autos become
increasingly affordable, more Chinese want to buy
them. According to figures from the Ministry of
Public Security, there are now about 30 million
motor vehicles on the road across the country. The
number is expected to shoot up as sales of
automobiles in China continue to grow.
According to industry statistics, some 5.7
million motor vehicles were sold in 2005. It has
been predicted that some 9.6 million units will be
sold in 2010. If the current pace of expansion
continues, there will be 140 million motor
vehicles on China's roads by 2020.
The
sharp increase in vehicle uptake is boosting
China's demand for oil, so much so that Chinese
experts now expect oil shortages to become a
chronic problem, fundamentally threatening the
country's energy security.
Zhu Jianjun, an
official with the China National Petroleum Corp
(CNPC), the parent of Hong Kong-listed PetroChina,
said that as international oil prices continued to
rise, China has had to spend more and more foreign
exchange on oil imports. In 2004, oil imports cost
China US$43 billion, which increased to more than
$50 billion last year.
Also, China faces
increasing political and diplomatic risks in the
competition with other countries for oil imports,
Zhu said. Therefore, China must make efforts to
increase its domestic oil production, to increase
oil reserves, and to search for new energy
sources.
But other analysts do not believe
China can sharply increase its oil production,
simply because China is geologically oil-poor.
This remains true despite a recently increased
estimate for China's prospective oil reserves by
the Ministry of Land and Resources, which put
reserves at 22 billion tonnes, sharply up from the
previous estimate of 16 billion tonnes, after
recent exploratory efforts.
China's 11th
Five-Year Plan for Social and Economic Development
(2006-10) projects annual oil production over the
next five years to remain at a level between 185
million and 195 million tonnes. The static
oil-production projections reflect the geological
realities of China's mature oilfields,
notwithstanding the traditional bias in Five-Year
Plans for over-optimistic production increases. It
is unrealistic to expect such small, or
non-existent, increases in annual production to
meet the raging growth in demand.
China's
oil demand is growing rapidly indeed. Oil
consumption totaled more than 300 million tonnes
last year, which is expected to jump to 500
million tonnes by 2020. However, China's oil
consumption will not reach its peak until 2040,
according to a recent estimate - which means oil
demand will continue to grow between 2020 and
2040.
Therefore, China's oil imports are
expected to grow steadily. According to official
statistics, China imported 120 million tonnes of
crude oil in 2004. Last year, China's oil imports
grew to 136 million tonnes, accounting for 42.9%
of its total consumption. It is generally expected
that by 2010, half of China's oil demand will be
met from imports.
To be sure, various
technological solutions for the looming oil crunch
have been suggested. For example, many state-owned
or state-controlled coal producers in China are
investing tens of billions of yuan in
coal-to-liquid-fuel projects. But such projects
only turn one form of fossil fuel into another,
which cannot solve China's energy shortage in the
final analysis.
Feng said worsening energy
shortages brought about by industrialization,
urbanization and growing numbers of cars pose a
serious challenge to Beijing's energy policy,
threatening the country's energy security.
He suggested that China can reduce energy
consumption by improving energy efficiency, since
currently China is one of the most
energy-inefficient countries in the world, in
terms of energy used per unit of GDP (gross
domestic product). Also, he argued, the government
should encourage the research and use of new
energy sources.
In fact, Beijing has
already begun to address the problem of energy
inefficiency. During the annual session of the
National People's Congress in March, Premier Wen
Jiabao set the target that energy consumption per
unit of GDP must drop by 20% from its current
level.
However, analysts generally believe
that to ease its energy shortage, China will have
to build more nuclear power plants and
hydroelectric power stations in upcoming years.
How to do this without harming the country's
environment will be another huge challenge for the
government.
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