Chinas Energy Drive and Diplomacy

INTERNATIONALREVIEW·91·ChinaChinaChinaChina’’’’ssssEnergyEnergyEnergyEnergyDriveDriveDriveDriveandandandandDiplomacyDiplomacyDiplomacyDiplomacyHamayounKhanAbstractAbstractAbstractAbstract：China'sneedforenergyisgrowingfasteritsproduction.Itwasself-sufficientuntil1993,threedecadesofrapideconomicgrowthhaveledittolookabroadtomeetitsenergyneeds.Whileitsapproachuntilnowhasbeenviewedwithlotssuspicions,physicalcontrolofsuppliesanddistrustofinternationalmarkets,howeverChinaisincreasinglyrecognisingthevalueoftreatingoilasacommodityandadoptingamoreopenapproachtowardsinternationalenergymarketsandcooperation.Beijingiswillingtoplayamoreconstructiveroleasitincreasinglyengageswiththeinternationalsystemandlearnsthelimitsofaforeignpolicybasedonthetraditionalprincipleofnon-interference.InAfrica,MiddleEastandCentralAsia,chinaisfairlyanewplayeranditisnotonlysigningoildealsthere,butalsobringalotofeconomicprosperitytotheseregions.China’senergyprocurementsintheseregionsaresignificantlyexaggeratedandoverstated.KKKKeyeyeyeywords:words:words:words:China,EnergyDiplomacy,energysecurityAAAAboutboutboutboutttttheheheheAuthor:Author:Author:Author:ResearchFellow,InstituteofStrategicStudies,Islamabad,PakistanheenergyneedsofChinaaregrowingfasterthanthatofanyothercountry.China'srapideconomicgrowthoflastthreedecadesofhaveledittolookabroadtofulfilitsenergyneedsasitwasonlywasself-reliantinoiluntil1993.AlthoughtheChineseapproachuntilnowhasbeencharacterisedbyoilmercantilism,physicalcontrolorlockingupofsuppliesanddistrustofinternationalmarkets,itisincreasinglyrecognisingthevalueoftreatingoilasacommodityandadoptingamoreopenapproachtowardsinternationalenergymarketsandcooperation.AttimesChinesehaveinvestedinoilexplorationandextractionincountriesandregionssufferingfromdeadlyconflict,andthishasmadeChinatotakepositionscounterproductivetoconflictresolution,likeforexampleintheearlystagesoftheDarfurconflict.T·92·China’sEnergyDriveandDiplomacyHowever,Beijingiswillingtoplayamoreconstructiveroleasitincreasinglyengageswiththeinternationalsystemandlearnsthelimitsofaforeignpolicybasedonthetraditionalprincipleofnon-interference.Chinaisnowplayingaveryimportantroleinthesolutionofdifferentconflicts(Darfur,Iran,North-Korea).TheinternationalcooperationwillbefacilitatedbyabetterunderstandingofChineseenergypolicyandbehaviour.InthispaperonlyexternalfactorsorChineseenergypoliciesinthreedifferentregions(MiddleEast,AfricaandCentralAsia)willbediscussed.Chinesecompaniescannotdominateinternationaloilsupplies,nowastheyarebeingalleged.TheyaresmallplayersoutsideofChina,andtheoiltheybringonlineexpandsglobalsupply,benefitingallconsumers.Inmanycasethemajorityofoiltheyproduceissoldontheopenmarket,notshippedbacktoChina.Furthermore,Beijing'sideaofenergysecurityisshowingsignsofevolvingandtheChinesearediversifyingitssourcesofenergyduetosomefactorswhichwillbediscussedinthisstudy.IntroductionIntroductionIntroductionIntroductionWhilerestoftheworldexperiencedifficultieswhenitcomestotheirenergydemandsandsouringenergyprices,Chinaisnoexception.China’senergysupplyanddemandshavealsostartedexperiencingproblems.China'scurrentoilproductionislessthanapproximately4.5%oftheworldtotal,butconsumptionrankssecondtotheUS.①However,Chinascorednewhighsbothinoiloutputandconsumptionin2007,producing186.7milliontonsofcrudeoilin2007,anincreaseof1.6%from2006.②Some46.05%ofChina'scrudeoilconsumptionhastobemetbyimportsin2007.③Chinaentryintotheoilimportercountrybeganin1993.Sincethenitscrudeoilimportshaverisen.In2005,Chinaimported136milliontonsofoil.China'soilandnaturalgasresourcestoragein2006was11.1%and4.3%oftheworldaveragerespectively.④Itispredictedthatbetween2010and2020,China'soilandgasdemandwillreach340millionand484milliontonsrespectively,Chinacansupply195million①Oiloutput,consumptionbothhitrecordhighin2007,April5,2008,ChinaDaily.②Ibid.③HowwilltheriseinoilpriceaffectChinaandtheworld?,June15,2006,People’sDailyOnline.④Ibid.INTERNATIONALREVIEW·93·and184milliontonsitself,buttherestwillhavetodependonimports.①AccordingtotheInternationalEnergyOutlook2007,China’sconventionaloilproductionisprojectedtodeclineinthecomingyearsandChinaconsumptionofenergyisgoingtoincrease.②Althoughtherehasbeendifferenceofstatisticsfromthewesternsources,whichpredictsthenumbermuchhigherthantheChinesesources,neverthelessthereisconsensusthattheChinesedemandforoilwillonlyincrease.Ontheotherhand,Chinacurrentlylacksnecessarystrategicoilstoragecapacityandisvulnerableindealingwiththesuddenstopofoilsupplyorlargescalefluctuationofoilprice.Chinaaimstobuildupastrategicoilreserveof12milliontonsby2010,from2-3milliontons③currently.④Chinaisdeterminedtobuildaresource-efficientsocietybytransformingitsmodeofproductionandconsuminglessenergy.Thiswillbeconducivetoalleviatingtheimpactoftheoilcrisis.RisksRisksRisksRisksforforforforChina/EnergyChina/EnergyChina/EnergyChina/EnergySecuritySecuritySecuritySecurityRisksRisksRisksRisksEenergysecurityhasbecomeanimportantconsiderationofChinesepolicies.DuetothebigchangesinChina'soilsupply-demandsituation,thecountry'soilsecuritywill