According to the China Securities Journal, China’s natural gas consumption is expected to exceed 550 billion cubic metres (bcm) by 2030 and is expected to account for 12.6 percent of the country’s total energy consumption by that date.
Conventional gas production capacity is estimated to reach 250 bcm by 2030, which will create a shortfall that will need to be filled by unconventional resources. At 1,115 trillion cubic feet (tcf), China holds the world’s largest reserves of shale gas according to the U.S. Energy Information Agency.
To meet its growing demand for natural gas, China not only looks towards its own rich deposits – according to Jiang Xinmin, a researcher with the Energy Research Institute under the National Development and Reform Commission, by the end of July 2013, the country had invested $3.25 billion on exploiting 54 possible shale gas fields – but also to energy investments around the globe. In recent months, China has signed deals to import coal and liquefied natural gas (LNG) from Australia as well as to receive natural gas via a pipeline from Russia.
According to the panellists speaking at the “Platforms, Pipelines & Policies: Energy & Security in China and Asia Pacific” event at the Wilson Center on September 17, China’s huge appetite for energy might not only impact on the global oil and gas markets, but trigger geopolitical tensions in Asia as well.
The panellists pointed to the fact that countries in the South and Southeast Asia, themselves experiencing a rapid growth and an increasing demand for energy, might not continue in their role as the major oil and liquefied natural gas suppliers to countries such as China, South Korea, and Japan.
“Energy competition can multiply territorial disputes,” said Mikkal E. Herberg, senior lecturer at the University of California, San Diego, and research director of the Energy Security Program at the National Bureau of Asian Research.
The situation is especially difficult when it comes to the territorial disputes in the South China Sea, which involve both island and maritime claims among seven sovereign states within the region, namely Brunei, China, Taiwan, Malaysia, the Philippines, and Vietnam.
The Ministry of Geological Resources and Mining of the People’s Republic of China estimate that the South China Sea may contain 17.7 billion tons of crude oil. Other sources claim that the proven reserve of oil in the South China Sea may only be 7.5 billion barrels, or about 1.1 billion tons. An EIA report on the areas quotes the U.S. Geological Survey estimate which puts the region’s discovered and undiscovered oil reserves at 28 billion barrels, as opposed to a Chinese figure of 213 billion barrels. The same EIA report also points to the wide variety of natural gas resource estimations, ranging from 900 trillion cubic feet to 2 quadrillion cubic feet.
In other words, there is a lot to fight over and there is no surprise that the Chinese are sensitive on the subject. Earlier this year, the Chinese Foreign Minister Yang Jiechi called Secretary Clinton’s speech at the Association of Southeast Asian Nations (ASEAN) summit in Hanoi, an ‘attack on China’ because she called for the negotiations over the rights to resource extraction in the South China Sea to be ‘multilateral rather than bilateral’.
Apart from throwing its weight in territorial disputes, China also wields a lot of power in the energy market. As oil demand from OECD countries is expected to plateau, and the demand from the U.S. is fulfilled from their domestic production, China emerges as the biggest buyer. As Amy Myers Jaffe, executive director of Energy and Sustainability at the University of California, points out, China’s dominant position allows it to play off the two major energy suppliers – Russia and Australia – off against each other, getting the best deals and pushing down prices. It also enters into agreements with countries such as Venezuela, Russia, and some African states, in which it gets “oil for free” in exchange for development assistance.
What is more, China’s recent tightening of relations with Russia – while the latter was looking for a replacement for the European energy market, affected by the sanctions – and which culminated in a recent deal between Gazprom and Chinese state-owned China National Petroleum Corp (CNPC), affected more than just these two countries. Analysts agree that it precipitated the export push of American fuels to Europe, which – in turn – could lead to higher domestic prices, more expensive feedstocks, and a slow-down in the booming U.S. petrochemical industry.
“Energy pricing is globally driven,” said Jan H. Kalicki, a Wilson Center public policy scholar and co-editor of Energy and Security: Strategies for a World in Transition. “So the U.S. market will feel the impact no matter how much we produce here at home.”
Article continues below this message
Have your opinion heard with Shale Gas International
We accept interesting, well-written opinion and analysis articles of up to 1,500 words, that offer unique insights into the shale industry. The articles cannot be overtly promotional in nature and need to fit into at least one of our content categories.
If accepted, the article must be exclusive to Shale Gas International website and cannot appear on any other websites, publications, etc. Each article may contain up to three links to external websites relevant to the content discussed in the piece.
If you would like to contribute to Shale Gas International website, please contact us at: editor[at]mw-ep.com