China: Why Do We Care?

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Transcript China: Why Do We Care?

NS 4053 - Winter 2013
Dan Jones
Nick Devorak
Ryan Harris
Zeb Daniel
History of China Energy
China’s Energy Infrastructure
Energy Breakdown
Internal/External Factors
2040 Outlook
Why Do We Care?
Where do we go from Here?
History of China Energy
China's real gross domestic product (GDP) grew at an estimated 9.2
percent in 2011 and 7.8 percent in the first half of 2012, after
registering an average growth rate of 10 percent between 2000 and
• Note: China mitigated the 2008 global financial crisis with a
massive $586 billion (4 trillion yuan) stimulus package spread
over two years.
Was a net oil exporter until 1990 and in 2009 became the world's
second largest net importer
Changes Trending:
• Breakup of large single Electricity provider into 5smaller ones
• Oil Providers divesting from specialized roles,
integrating upstream and downstream operations
Static Trends:
• Loose Political Control over Coal, decentralized
• Strong Political Control over pricing (NECs gaining
China’s Energy Infrastructure
Central Control and management of resources
Historically inflexible and time lapsed
National Energy Companies
• ministry-level SOE until 1988
• Now, diversified, canned competition
OIL – making news
• PetroChina Co Ltd (CNPC) – north/upstream
• Sinopec – south/downstream
• CNOOC Ltd – worldwide/upstream
• Sinochem – downstream
COAL – China’s current energy source – 75%
• Highly diversified in both mining, generation,
and transmission – inefficient/loose eco regs
NUCLEAR – up and coming
Coal Industry
Production: 3,226.094 million short tons
Consumption: 3,118.139 million short tons
Imports: 113.655 million short tons
Future Issues and/or Shortfalls:
In 2009 china became a net importer of coal for the first time
in over two decades. This was a result of increase cost of
domestic coal, difficulty of transportation to the power
plants, and increased environmental and safety concerns.
Oil Industry
Production: China produced an estimated 4.3 million barrels
per day (bbl/d) of total oil liquids in 2011, of which 95
percent was crude oil. China's oil production is forecast to
rise by about 170 thousand bbl/d to nearly 4.5 million bbl/d
by the end of 2013. Over the longer term, EIA predicts a
flatter incline for China's production, reaching 4.7 million
bbl/d by 2035.
Consumption: 8,924 Thousand Barrels per Day
Imports: 4,635.31 Thousand Barrels per Day
Future Issues and/or Shortfalls:
Domestic Price Regulations
LNG and Natural Gas Industry
Production: 3,334 Billion Cubic Feet
Consumption: 3,768 Billion Cubic Feet
Imports: 435 Billion Cubic Feet
Future Issues and/or Shortfalls:
China became a net importer of natural gas in
2007 for the first time in over two decades.
Currently accounts for a small percentage of
power generation, with the projection of an
increase role.
Energy Generation
Production: 78.3.48 Quadrillion BTU
18% Hydroelectric, 80% Coal
Consumption: 84.673 Quadrillion BTU
Imports: 6.325 Quadrillion BTU
Future Issues and/or Shortfalls:
Industry accounts for 75% of electricity
Became the largest producer of
Hydroelectricity in 2010.
2040 Energy Outlook
China’s population will peak around 2030, will see a steep drop in its working-age
group. This shift, tied to policies on family size, helps explain why China’s gross
domestic product (GDP) growth – and its energy demand – is expected to
moderate in coming decades.
Non OECD energy demand will grow by close to 60 percent. China’s surge in
energy demand will extend over the next two decades then gradually flatten as its
economy and population mature. Elsewhere, billions of people will be working to
advance their living standards – requiring more energy.
China, which today accounts for close to 50 percent of global coal demand, will
see its coal usage fall by more than 10 percent through 2040.
China, which today is one of the largest users of energy for
residential/commercial purposes, will see demand flatten in this sector after 2025
as its population nears a peak and energy efficiency continues to improve.
China’s industrial energy demand continues to grow; over the next two decades,
it will rise by about another 20 percent. Starting around 2030, China’s industrial
energy demand will peak as the country’s population reaches a plateau its
economy matures and its infrastructure expands at a more measured pace.
China’s electricity demand will more than double by 2040. However, China will do
what the United States and Europe have been doing, which is to shift its
electricity generation away from coal.
China’s natural gas demand growth of 15% will be split between the industrial
sector and the residential/commercial sector, where distribution lines are being
rapidly expanded and gas is very competitive versus liquefied petroleum gas
Source: Exxon Mobile and EIA
Key Internal Factors
Centralized Command and Decision Making vs Global Markets
Diversification of Energy Sources - How to get off of coal?
Energy Demand is Driven by Heavy Industry (Industry-Led Demand)
Consumption-Driven Demand
External Factors
External According to Whom?
– Taiwan
– Spratly Islands
Developing Alternative Means
– Kazakhstan
– Myanmar (Burma)
How far can Chinese Foreign Policy Reach?
– Sudan
Why Do We Care?
“Strategic Pivot”
– Taiwan
– Japan
– Australia
“String of Pearls”
– Chinese Alliances/Agreements
Positive Effects
– New Power to Develop Capabilities/Negotiate
Where Do We Go From Here?
Directly to War: Do not pass “Go,” Maybe Collect Profits
Joint Ventures in Energy
– Agreements to Sell American LNG (in future)
– Tech Aid to Harvest from Latent Shale Reserves
Status Quo
– A “Next Cold War?”