IEA Examines China’s Worldwide Quest for Energy Security

With primary energy consumption second only to that of the United States, China is an energy superpower and the world’s largest potential market for energy. It is the world’s third largest producer of energy, the largest producer of coal and the sixth largest producer of crude oil. China leads the world in biomass consumption. It is the world’s second largest emitter of carbon, accounting for 14% of the world’s total emissions and is projected to become the largest over the next few decades.

There has been for some time a clear need for a thorough and independent survey of China’s efforts to ensure secure and sufficient energy supplies. And today, the International Energy Agency launches a new report, China’s Worldwide Quest for Energy Security, in the presence of His Excellency Wu Jian, the Ambassador to France of the People’s Republic of China.

This publication examines the efforts of Chinese leaders who have scoured the world for dependable and affordable oil imports. It considers the country’s ultimate role in the world energy system. It raises the question whether China’s efforts will divert oil and other energies away from OECD member countries and whether it will act as a responsible international citizen, working to fit into established patterns of energy trade and investment.

There is no doubt that China’s near-term energy behaviour matters critically not only to its own citizens – who account for one-fifth of the world’s population – but to the world at large.

China’s Worldwide Quest for Energy Security concludes that China is likely to continue along the path of international co-operation, rather than confrontation, in its efforts to ensure a secure energy supply.

The study examines the root causes of China’s energy security concerns, its public policy responses and its growing links with major energy suppliers.

Though the Chinese have made strenuous efforts to exploit their domestic resources, economic growth eventually overwhelmed those efforts. China’s stagnant oil production has not kept up with its rapidly rising energy consumption and since 1993, the country has been a net oil importer. Gas imports are also projected to increase as China switches to cleaner energy.

China’s energy policy has been changing swiftly to meet this new reality. Although some policies still reflect attitudes assumed in the days of energy self-sufficiency, Chinese leaders have quickly grasped the essentials of energy-security issues in an import-dependent environment. Their basic strategies are (i) maximum development of domestic resources, (ii) creation of strategic reserves, (iii) seeking foreign technology and investment, and (iv) making strategic investments in upstream production facilities abroad.

Over the past decade China has created a network of energy relationships across the entire Asian land mass and even in Africa. These efforts have been co-ordinated with China’s wider investment, trade and foreign policy objectives. The Chinese are also intensively studying how the rest of the world operates in the energy sector.

Aware of its growing dependency on imported energy and foreign investment and technology, China seeks a more prominent position in the existing global energy system. Where they can, the Chinese try to open new connections. So external energy policies are increasingly entwined with foreign economic and security policies in general. The Middle East is emerging as the main supplier of China’s crude imports. Russia, Central Asia, ASEAN and West Africa will also be important areas in China’s future energy supply.

The role of this vast nation in global energy markets can only grow stronger with time. Trade and investment are the main elements in China’s energy co-operation with the rest of the world today. More joint development could take place tomorrow: such ventures are already in place in Kazakhstan, Turkmenistan, Iraq and Sudan.

These considerations have led the IEA to develop close co-operation and intensive dialogue with China. In 1996 the two parties signed a Memorandum of Policy Understanding in the Field of Energy. We have organised with the Chinese more than a dozen workshops, seminars and conferences – the latest one on China’s natural gas industry in Beijing on 9-10 November 1999. The Agency has published a number of China-related studies, including Energy Efficiency Improvements in China: Policy Measures, Innovative Finance and Technology Deployment, Coal in the Energy Supply of China and an important China chapter in Looking at Energy Subsidies: Getting the Prices Right.

The IEA has a role to play in improving the mutual understanding, broadening mutually beneficial co-operation and dialogue between its member countries and China. It will continue to share its expertise and experiences on challenges that China is currently facing. China’s Worldwide Quest for Energy Security is further evidence of the Agency’s readiness to address the issues arising from China’s rapidly changing energy stance.