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Article Excerpt
Since 1996, China has become a net importer of crude oil, currently the second-largest consumer in the world after the United States and the third-largest importer of oil after the United States and Japan. Thus, it is natural that China should turn to the Persian Gulf region, with the world's largest proven crude-oil and natural-gas reserves, to provide energy for the world's most dynamic economy (average annual growth rate, more than 9 percent). To analyze China's policy in the Persian Gulf, I start with an examination of China's production and consumption of energy and the prospects for its future imports of crude oil and natural gas. This is followed by an examination of China's relationships with the states of the region. Finally, Sino-American rivalry in the region is discussed.
BACKGROUND
At 3.73 million tons in 1959, China's post-revolution oil production was very low. A century of dependence on imported oil and oil products ended in 1963. In that year, the Daqing oil field in northern China produced 4.3 million tons of crude oil out of a national total of 6.48 million. But this self-sufficiency did not serve the goal of economic and social development due to China's relations with other countries. The Soviet petroleum and technological assistance that were critical for China's oil industry were terminated in July 1960. Moreover, a U.S.-led embargo lasted from 1950 to the Sino-American rapprochement in 1971. China was self-sufficient in energy, but the economy was on the verge of collapse. In the early 1970s, China's international relations improved, leading to the expansion of the economy. Oil and coal became primary export commodities in exchange for industrial equipment and technology from developed countries. China took advantage of the 1973 oil crisis to export oil to Thailand, the Philippines, Japan and other Asian countries in order to cultivate a friendly regional environment for domestic modernization and development. The hard currency earned from oil exports was spent on the import of technology and equipment to develop an export-oriented economy critical for development. China's crude-oil exports reached a peak of 30 million tons by 1985, but declined afterward due to growing domestic consumption and slower growth in production. China began to import crude oil from Oman in 1983 as a temporary measure to deal with the problems of transporting crude oil from northern China to refineries along the upper stretches of the Yangtze River. In 1988, Chinese imports of crude oil and oil products began to rise rapidly due to increased domestic demand. In 1993, China became a net importer of oil products and, in 1996, a net importer of crude oil. (1)
ENERGY CONSUMPTION
China is the largest country in the world, with a population of 1.4 billion people. Its economy has grown at a pace unprecedented in modern history: more than 9 percent a year between 1978 and 2005. Energy is critical to service this growth, resulting in a rapid rise in demand across the fuel spectrum, including oil, natural gas, electricity, coal, nuclear and hydroelectric resources. Coal continues to account for two-thirds of total energy consumption. China is the world's largest producer and consumer of coal, which accounts for over 80 percent of its electricity generation. Coal consumption is expected to double over the 2001-25 period, during which China is also expected to account for one quarter of the world's carbon-dioxide emissions. Though now a modest net exporter of coal, China is likely to become a net importer as early as 2015. Despite adding 199,300 megawatts (MW) of electricity-generating capacity and increasing coal consumption by 21 percent over the last five years, China continues to be plagued by an electricity shortage. At present, nuclear-generated electricity accounts for only 1.4 percent of its total power supply, compared to an average 16 percent for developed countries. However, China plans to build two large nuclear plants per year over the next two decades, thus becoming the largest country that is planning nuclear-power plants. Extensive hydroelectric development plans and development of renewable energy sources such as solar and wind are also underway, but these will only service a small portion of electricity demand. China has been Asia's largest oil producer since the mid-1960s, producing roughly 3.5 million barrels per day (b/d) in recent years. At present, China is self-sufficient in natural gas. (2)
But China's two-plus decades of rapid growth in industry, trade, urbanization, population and per capita income have resulted in booming energy demand. Although these are characteristics of the rest of the developing nations of Asia, the size of China's economy and population accounts for the sheer scale of its energy needs. Oil demand doubled between 1984 and 1995, from 1.7 million b/d to 3.4 million b/d, and doubled again to 6.8 million b/d in 2005. In that year, 43 percent of this consumption was derived from imports. In 2004, China's annual growth in oil demand approached roughly 800,000 b/d, accounting for a demand growth of one third of the world, and 70 percent of the Asia-Pacific region. China became a net importer of oil in 1993 and, by 2003, surpassed Japan to become the second-largest consumer behind the Unites States and the third-largest oil importer behind the Unites States and Japan. It now imports more than 40 percent of its total oil needs. The International Energy Agency (IEA) predicts that China's oil imports will grow fivefold, from slightly under 2 million b/d in 2002 to roughly 11 million b/d, by 2030. By then, oil imports will account for 80 percent of China's total oil needs, of which more than half will come from the Persian Gulf. (3)
As noted above, China is now self-sufficient in gas production only because gas represents less than 3 percent of its total energy consumption, compared to the global average of 23 percent. However, the Chinese government has embarked on a policy to replace coal with gas for generating electricity in order to diversify overall commercial and household energy use and provide a clean fuel for environmental needs. Current plans call for the use of gas to make up 8-10 percent of total energy consumption by 2020. Therefore, beyond 2010, demand is likely to begin to outrun domestic production. The U.S. Energy Information Agency (EIA) has forecast...
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