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China’s Energy Development and Oil Outlook

China’s Energy Development and Oil Outlook. David G. Fridley Energy Analysis Department Lawrence Berkeley National Laboratory DGFridley@lbl.gov china.lbl.gov Presentation to the Independent Petroleum Association of America San Francisco, CA 17 June 2005. Outline.

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China’s Energy Development and Oil Outlook

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  1. China’s Energy Development and Oil Outlook David G. Fridley Energy Analysis Department Lawrence Berkeley National LaboratoryDGFridley@lbl.gov china.lbl.gov Presentation to the Independent Petroleum Association of America San Francisco, CA 17 June 2005

  2. Outline • Background on Energy Structure • China’s Current Energy Crisis • China’s Oil Market • Outlook

  3. China has undergone dramatic changes in energy consumption since 1996

  4. Distinctions of China’s energy system • Coal is king: 68% of energy consumption • Oil accounts for 23% of energy consumption (40% in US) • Industrial consumption dominates most energy forms • Transport is ~35% of oil consumption vs 63% in US

  5. China has ambitious energy and development goals for 2020 2020 Goals (compared with 2000) • Quadruple GDP • Double energy use • Raise urbanization rate from 35% to 65% But energy demand is now growing so rapidly that development goals are in jeopardy.

  6. Energy is growing faster than GDP

  7. Stresses on the energy system are highly visible • In 2004, widespread power shortages(24 of 31 provinces) • Soaring coal prices • Transportation bottlenecks for coal • Significant economic losses • Rapidly growing imports of oil, especially for use in small generators

  8. Oil imports jumped 30+% in 2003 and 2004

  9. Factors behind the current oil consumption boom • Transient factors • Power shortage • Direct (use of diesel in small generators) • Indirect (rail transport bottlenecks) • Sustained factors • Transportation demand • Freight transport (5.4 trillion t-km) matters more than passenger transport (1.4 trillion person-km) • Petrochemical expansion • New ethylene capacity by 2010 alone to add 640kbd demand • Residential energy ‘modernization’ • 168 million urban residents use LPG now

  10. Power shortage • 440 GW installed capacity by December 2004 • 74% fossil (mainly coal) • 24% hydro, 2% nuclear • 30 GW estimated shortage in 2004 • Driven by boom in heavy industry • Over 50 GW installed in 2004 • Over 40 GW expected in 2005 • Surge in diesel generator use; 1/4th to 1/3rd of additional imports in 2003 and 2004 for power generation • Balance expected by end of 2006

  11. Oil security is at center-stage of national energy security debate…

  12. The US View “We should encourage China to move away from oil” (DOE official, 2004) “China should leapfrog past an oil-based transport infrastructure” (Major NGO, 2004) “Unlike the U.S., China's energy infrastructure is largely underdeveloped and primarily coal-based. It has not yet invested in a multibillion-dollar oil infrastructure. China is therefore in a better position than the U.S. to bypass oil in favor of next-generation fuels.” (Director, Institute for the Analysis of Global Security , 2005) “It's in our economic interest and our national interest to help countries like India and China become more efficient users of oil.” (President Bush, 2005)

  13. China’s net imports are 5% of world traded crude oil; demand is 8% of world total

  14. China’s Oil Strategy • Enhance domestic production and establish upstream reserve • Construction of SPR • Diversification of import sources • National company overseas investment in major producing areas • Focus on Middle East, Russia, Asia-Pacific, Central Asia • Regional security and economic cooperation arrangements (SCO) • Closer ties to Russia, India, Middle East, and Brazil

  15. The Future?

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