One Belt, One Road, and One Pipeline: Chinas New Approach to Energy - PowerPoint PPT Presentation

XXI April International Academic Conference on Economic and Social Development One Belt, One Road, and One Pipeline: China’s New Approach to Energy Security by Irina Semykina, UCL

Important Disclaimer All conclusions are derived from data and forecasts published before February 2020. We may expect significant changes in all estimates.

This presentation does not cover: Belt and Road countries are among the key world’s fossil fuels producers. They ensure 50% of oil and about 48% of natural gas global production (Duan et al., 2018) China’s search for energy security has led to the deepening political and economic relationships with energy producers and countries along the Belt and Road which have transit potential (Zhao, 2008) BRI is an important component in implementing China’s energy security strategy and serves as a mean for diversification of energy supplies and related transportation routes (Johnson, 2016) In April 2019 China announced the establishment of the Belt and Road Energy Partnership (BREP) with 30 participating countries. The BREP aims to strengthen infrastructure connectivity, facilitate energy trade and enhance energy investment by lowering investment barriers (obor.nea.gov.cn)

This presentation W hy, despite the global LNG market, is China willing to tie itself to long-term contracts and puts great economic and political efforts into developing inland pipeline infrastructure? 1. . The patterns of China’s 2. . LNG versus pipeline gas: 3. . Case of Sino-Russian energy consumption and how do different sources energy cooperation the characteristics of and means of China’s energy mix transportation influence transformation China’s energy security?

#1 Given China’s patterns of energy consumption and existing environmental challenges, what are the characteristics of China’s energy mix transformation?

Per capita energy use in China and the world, GJ 400 Energy consumption on 350 US per capita level is 300 still low in China. 250 200 OECD The demand 150 is expected to China 100 grow up to 2040 Total World 50 Non-OECD 0 1965 1969 1973 1977 1981 1985 1989 1993 1997 2001 2005 2009 2013 2017 Source: BP Statistical Review of World Energy, 2019

China’s Primary Energy Consumption by Fuel by 2040 4,5 bln toe Renewables 4,0 Hydro 3,5 Nuclear Gas 3,0 Oil 2,5 Coal 2,0 1,5 1,0 0,5 0,0 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2020 2025 2030 2035 2040 Source: BP Energy Outlook, 2019

Share of different sources in China’s energy consumption 1965-2018 Hydro Renewables Nuclear Coal Oil Natural gas 90 90 90 90 90 90 80 80 80 80 80 80 70 70 70 70 70 70 60 60 60 60 60 60 50 50 50 50 50 50 40 40 40 40 40 40 30 30 30 30 30 30 20 20 20 20 20 20 10 10 10 10 10 10 0 0 0 0 0 0 65 80 95 10 65 80 95 10 65 80 95 10 65 80 95 10 65 80 95 10 65 80 95 10 Source: BP Statistical Review of World Energy, 2019

China’s Natural Gas Consumption by Sector 400 bcm Transport 350 300 Energy industry own use 250 200 Residential and commercial 150 Industry 100 50 Power generation 0 2005 2007 2009 2011 2013 2015 2017 2019 2021 2023 Source: Gas 2018, Analysis and forecasts to 2023, IEA

China’s Natural Gas Production, Import and Consumption 300 bcm Import 250 Production 200 Consumption 150 100 50 0 1970 1972 1974 1976 1978 1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 Source: BP Statistical Review of World Energy, 2019

#2 LNG versus pipeline gas: how do different sources and means of transportation influence China’s energy security?

Major LNG trade flows in 2018 Picture: S&P Global Platts

Energy Transportation Security Scale Sea lines Pipelines wartime peacetime Pipelines Sea lines wartime peacetime SECURE INSECURE Source: Øystein Tunsjø Security and Profit in China's Energy Policy: Hedging Against Risk , 2013

‘Double Helix’ of China’s Gas Imports 80 bcm 70 Pipeline imports 60 LNG imports 50 40 30 20 10 0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Source: BP Statistical Review of World Energy, 2019

China’s Natural Gas Imports Sources in 2018 Pip ipeli line gas Uzbekistan 6,3 Kazakhstan 5,4 Myanmar 2,9 Turkmenistan 33,3 Other 5,2 Australia 32,1 Russia 1,3 Nigeria 1,5 US 3 Papua New Guinea 3,3 Indonesia 6,7 LNG Malaysia 7,9 Qatar 12,7 Source: BP Statistical Review of World Energy, 2019

Where Can China Get Gas From? o Central Asia-China gas pipeline and Galkynysh gas field in Turkmenistan; o China-Myanmar gas pipeline and deep- water port of Kyaukphyu; o Power of Siberia gas pipeline Picture: Nikkei Asian Review

#3 ‘ Sopryazheniye ’ and the long -term prospects of Sino-Russian energy cooperation

Power of Siberia

Russia – China Key Energy Deals Timeline Power of Siberia 2? Trans-Mongolian pipeline? Rosneft x Rosneft x CNPC Rosneft x CNPC ChemChina Crude oil Crude oil Crude oil SIBUR x Sinopec 15 mt x 20 yrs 13 mt x 25 yrs 2,4 mt x 1yr SIBUR 10% Rosneft x CNPC Gazprom x CNPC NOVATEK x Oil refining Natural gas NOVATEK x Silk CNOOC CNODC in Tianjin ‘Power of Siberia’ Road Fund Arctic LNG 2 13 mt 38 bcm x 30 yrs Yamal LNG 9.9% 20% 2010 2019 2009 2013 2017 2014 2015 2016

Natural Gas Demand in China: 2040 Forecast 800 Demand, bcm Net imports, bcm 708 700 637 600 559 500 464 369 400 336 296 +304% 300 248 234 2018-2040 200 106 100 28 0 2000 2017 2025 2030 2035 2040 Source: IEA World Energy Outlook 2018

Summary Even if at a slower pace, energy consumption in China is expected to grow up to 2040; China is planning to use gas as an alternative to more polluting options (coal, biomass, and oil), and increasingly relies on imports to meet its demand; In 2018, China became the second largest LNG importer. Beijing has certain energy security concerns about shipping routes and the existing chokepoints; ‘Double Helix’: China is ready to rely on long -term contracts to ensure the uninterrupted energy supply. The country puts efforts into developing inland pipeline infrastructure, obtaining access to oil and gas fields and acquiring shares in companies around the world; Russia’s contribution to the changing dynamics of China’s energy security is supposed to increase in the coming decades.

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