In line with its growing economic might, China's dependence on imported oil has been rising rapidly - increasing from 33 per cent in 2009 to 55 per cent in 2012. It is expected to rise to above 60 per cent in 2015, when China will become the largest oil importer in the world.
This growing dependence presents many challenges and China faces a difficult balancing act as it seeks to gain energy security while minimising domestic and geo-political risks.
One key aspect of China's strategy is to build pipelines to bring oil and gas into and across China as an alternative to high-risk shipping. Over a five-year period, it plans to double the length of its pipeline network, with construction of major new conduits such as the Kazakhstan-Xinjiang pipeline, the Myanmar-Yunnan pipeline and the Siberia-Daqing pipeline. In March China further announced it would provide a $500-million (Bt14.7 billion) loan to Pakistan to complete a joint gas pipeline project with Iran which would eventually pipe gas to Western China.
China has considerable shale gas reserves but faces serious challenges in tapping into them as it needs to develop appropriate technology and find solutions to the problems of competing land uses and high population densities in areas where there are large shale gas deposits. There are also large offshore gas reserves in the South China Sea, however, efforts to extract them may worsen relations with countries such as Vietnam and the Philippines. China is also seeking to increase its own oil production and so last year began operations on developing its first deep-water drilling rig. It is also intensifying oil exploration activities in Western regions such as Xinjiang.
In other planks of its strategy, China plans to improve the efficiency of its domestic energy markets by accelerating pricing, regulatory and other reforms. China is actively looking for smart-energy technology and is seeking to improve its transport systems to become more efficient in energy-use, such as with more use of rail. China has set an ambitious target to increase the level of its renewable energy to 20 percent of total energy consumption by 2020. It has the advantage of being a global leader in the production of solar panels - however, such market dominance can also produce problems, such as anti-dumping actions from Europe and the United States. It has also set a target of increasing its nuclear-power-station capacity by 20 per cent in 2013.
Although China does not appear to face immediate threats over energy security, many thorny political issues may arise from its attempts to diversify markets and protect supplies. Apart from territorial conflicts that could damage relationships with various Asian neighbours, problems could also develop with established powers over attempts to secure energy in the Middle East and Africa. The recently announced Pakistan-Iran pipeline agreement that China is backing illustrates this problem, as Pakistan has already drawn a sharp rebuke from the United States.
China has been highly successful in its energy security policy up to now, as it has worked quietly behind the scenes, supporting economic development overseas in return for continuity of energy supplies. It will be interesting to see if China can continue to play such a role as global dynamics shift and it becomes a more dominant player in the market.
For more columns in this series please see
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Article source: http://www.thethailandlinks.com/2013/03/25/beijings-difficult-balancing-act-for-energy-security/
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