Graham Lees | Bio | 17 Oct 2006
World Politics Watch Exclusive

Europe's new concerns about reliance on Russia for much of its energy security are nothing compared with the worries in many other capitals around the world about the problem posed by China's growing demand for oil and gas, say analysts.

Those worries are little mollified by repeated assurances coming out of Beijing that China's insatiable appetite for energy is not a threat to the rest of the world. Beijing's assurances don't sound convincing, many analysts say.
 
Each year since the early 1990s, China has been consuming more and more energy to fuel its fast-growing economy. Last year, the Chinese accounted for 26 percent of the world output of steel and 47 percent of cement, for example.

Beijing is now drafting what it calls a white paper that will spell out to the world its strategy for continued 10 percent annual growth without vacuuming up the earth's resources.

The white paper seems to be a sign that the Beijing mandarins themselves are alarmed. A new report from a research think-tank attached to the National Development and Reform Commission (NDRC) has estimated that China will need to consume 450 million tons of oil a year by 2020 if current trends hold. And at least 250 million tons will have to be imported. That's 5 million barrels a day, and a conservative estimate, say some energy experts.

Last year, China imported 136 million tons, or 6 percent of world usage.

 

The Washington-based international environmental organization Worldwatch Institute reckons that if China and burgeoning neighbor India were to reach just 50 percent of current U.S. per capita oil consumption over the next 25 years they would need 100 million barrels per day. Total global consumption last year was 85 million barrels per day.

"That would imply total worldwide oil consumption in 2050 of well over 200 million barrels per day," says a report by Worldwatch. "Few geologists believe that output will reach even half those levels before beginning to decline."

Now, with China's economic growth rocketing along at more than 10 percent this year, creating ever more demand for electricity-generating energy sources, Beijing says its white paper report will set minds at ease about China's seemingly insatiable demand for coal, oil and gas and the development of large scale nuclear, hydro and other alternative fuel sources.

However, China's hunt for energy is leading to conflicts, both at home and abroad, and to support for human rights-abusing regimes from Burma to Sudan in return for oil and gas.

At home, tens of thousands of people are being forcibly moved from their lands to make way for hydroelectric projects that critics say pose serious environmental risks. Abroad, there are disputes with Japan, Vietnam and the Philippines over disputed waters that may hold untapped oil and gas.

One stark example of the frightening scale of China's looming energy needs is its proposed nuclear program. Beijing planners envisage the creation of up to 30 nuclear power plants, but even these would barely supply 5 percent of national electricity needs by 2020.

The policy-setting NDRC said in March that China's electricity demand and supply would balance this year. In the hot summer just ended, there were reports of serious power cuts across the country.

The energy white paper being produced by the NDRC "will raise China's energy strategy and goals as well as elaborate on the country's energy policies and measures that have been taken," the official news agency Xinhua quoted an NDRC official as saying. "It aims to increase international understanding of China's energy policy and boost trust in China to improve the environment."

China's last white paper on energy, in 1997, has been dramatically overtaken by unimagined economic expansion that has seen national oil-garnering agencies like Sinopec and the China National Offshore Oil Corporation (CNOOC) foraging the world to secure supplies of crude oil and gas. In addition, China is importing more coal is despite its own large reserves, it is wooing Australia for its uranium and Chinese demand for solar cell panel development is complicating a world shortage of the cell ingredient silicon.

China is already generating more than 500 gigawatts of electricity per year, the equivalent of that consumed by 20 developing countries the size of Thailand.

Some Beijing officials say the United States poses a bigger threat to global energy security because it consumes much more oil than the Chinese, and has 300 million vehicles compared with China's 30 million. But strategists say trends indicate that there will be 150 million cars on Chinese roads by 2015.

Because of the sheer size and needs of China and its 1.3 billion people, Beijing's embrace of renewable energy is also putting pressure on global resources, say analysts.

"Even when it comes to something as seemingly positive as biofuel, the volume of China's feedstock needs has a knock-on effect globally," said commodities specialist John Rogers in Hong Kong. "It forces a strain on China's food production, especially with a growing water shortage at home, which leads to more imports of grains. Vast swathes of Brazil are given over to single crop production just for China."

But observers do not expect much new in the white paper, which is likely to be published early next year.

"It seems like this white paper is more a PR exercise. Top level window dressing I think," said a Hong Kong analyst with a large investment institution who did not want to be identified. "They are talking a lot about energy efficiency, but on the scale of China, with its huge variation in equipment and standards cross the country, this efficiency concept is easier said than done."

Foreign critics of China's recent energy policies point to the lack of a specific energy ministry, a department that was abolished in the 1990s as unnecessary. The critics say a constant tussle goes on between the restraining central government and expansionist provincial authorities that thwart implementation of many policies. Beijing's much-touted energy efficiency drive, for example, is being ignored by many in the provinces who view it as a brake on their economic development goals.

China's policy makers believe they can cut oil and other fossil fuel consumption not just by converting to renewable energy sources but also through energy efficiency, the new buzz phrase in Beijing.

"There is too much waste now," said CNOOC President Fu Chengyu, advocating punishment of energy wasters at an Asia-Europe business development conference last week. "If China can achieve efficiency like Japan and the U.S., we can keep the same economic growth rate while consuming the same amount of energy for the next 10 years," said Fu hopefully.

The problem is more than waste, however. Pollution caused by China's breakneck scramble for energy has spawned thousands of crude coal-burning power plants and factory furnaces, and chemical manufacture is having devastating effects on the environment and health.

More than half of the world's most polluted cities are in China, with air quality in many cities the equivalent of smoking two packs of cigarettes a day, says the Worldwatch Institute.

The air pollution drifting across to Hong Kong from industrial powerhouse province Guangdong is so severe that international financial institutions there admit they are having to increase incentives to keep or attract senior foreign staff.

In its search for energy security, Beijing keeps looking northwards to Russia's energy rich Siberia, but supply agreements remain elusive as the two sides haggle.

The latest plan, to build a line of coal-fired power plants just inside Russia to feed 10,000 megawatts of electricity a year into China -- that's almost one-third of California's generating capacity in 2005 -- has stalled over cost disputes, and may only be resolved with the visit to Beijing in November by Russian Prime Minister Mikhail Fradkov to.

Meanwhile, China has signed big, long-term supply deals for liquid natural gas from Australia, Indonesia and Malaysia to feed seaport processing terminals. But as Beijing envisages up to 15 such terminals, the Chinese are foraging as far as Norway for additional supplies.

Worldwatch's Flavin, in his 2006 State of the World report, argues that the world's resources are insufficient to enable countries the size of China and India, never mind numerous other developing countries, to use the same development model that was practiced in Europe and North America. "It is clear that efforts by individual countries to lock up their own foreign oil supplies cannot protect any of them from the risk of disruption in a globally connected petroleum market. A grand bargain is needed in which the global community commits to energy efficiency investments and to the development and financing of renewable energy technologies, with the goal of steadily reducing world oil use and carbon emissions."

Graham Lees is a Bangkok-based British journalist who has worked in several countries in East Asia over the past ten years covering regional business and political affairs.