China’s Road to Energy Security (1)

China’s road to energy security (1) By Xinhua writer Yang Jianxiang

BEIJING, Oct. 4 (Xinhua) — It was a mid May night, and trucks queued up at a gas station by the East 5th Ring Road of Beijing. The line was several hundred meters long, blocking a lane of the main road. At the station, the oil nozzles were left idle — the supply of diesel had run out and the new delivery wouldn’t’ come until after midnight.

“We have no oil here. Don’t wait any more. Please go to another place,” clerks at the Sinopec station shouted to the drivers, some of whom responded that their vehicles were out of fuel and couldn’t go any further.

When the delivery came, it would not be enough, a driver said. The limited stock would be sold on ration. Most vehicles would be partly filled and some would have waited in vain. The same situation was also seen at other stations, and it had been like that for days, the driver added.

The situation had a direct link with soaring oil prices on the international market. To the country’s decision makers, it was a harsh reminder of a vital issue — energy security.

Though the aggregated figure looks quite impressive, China is poor in energy resource reserves on per capita calculation. Proven reserves of fossil fuels have increased in recent years, but this cannot change the overall picture. Production of energy has continued to grow with the demand growing faster due to a rapid development of the economy, the quickening pace of urbanization and the rising living standard.

The country’s coal reserves ranked third globally. Production was the greatest, accounting for about 40 percent of world output in 2007. Given the current speed of exploitation, the reserves would be exhausted in a little over 80 years. The comparatively small reserves of oil and gas would dwindle even faster, in 15 years and 30 years respectively.

The government announced an energy strategy that prioritized conservation to optimize consumption; it relies on domestic production and seeks diversified sources to secure supply and to develop new and renewable energies as alternatives for the future. “We will strive to establish a steady, economic and clean energy supply system,” Zhang Guobao, minister in charge of the energy sector of the National Development and Reform Commission (NDRC), said at an international conference in January.

It might be necessary for China to maintain a fast economic growth, but energy consumption may grow at a slower pace if a good job is done in conservation. The country’s unit gross domestic product (GDP) energy consumption was three to eight times as much as those in the United States and Japan. Adjusting the demand of industries is a way to reduce energy intensity. A government announcement made on Oct. 11, 2007 terminated preferential power rates for high energy consuming industries such as electrolytic aluminum, alloy and chloro-alkaline enterprises. Tightening management and upgrading technology also help reduce the energy consumption of suppliers as well as consumers. For example, thermal plants were required to adopt highly efficient new technologies for coal burning power generation.

By the end of 2010 China has set a target of cutting down energy consumption per 10,000 yuan (1,460 U.S. dollars) of GDP by 20 percent, from 1.22 tons of coal equivalent (TCE) in 2005 to 0.98 TCE. That means an annual average of 4 percent.

Performance in the first two years did not warrant optimism, but things were improving. Last year, while the overall reduction rate of 3.66 percent still fell short of expectations, more than two- thirds of the provinces met the annual goal. This was in sharp contrast to the first year when only Beijing managed to do so.

NDRC Energy Institute director Zhou Dadi said although the central government had shown a strong will and genuine commitment to the task, efforts by some local governments and companies were inadequate. “The high-rising oil prices may force domestic companies to a higher level of energy conservation.” (more)

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