China's 21st Century Oil Strategy Outlined

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Last updated at: (Beijing Time) Thursday, November 14, 2002

China's 21st Century Oil Strategy Outlined

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The blueprint of China's oil strategy in the 21st century has largely taken shape.

Supervised directly by the State Council, China's cabinet, the plan is designed to ensure China's oil security at an initial investment of US$100 billion during the upcoming 20 years, according to one analysis in the website of the China News Agency (CAN).

As a specific step, Chinese Central Government will re-establish its once demolished National Energy Commission, letting it take charge of rolling out the ambitious oil strategy, the website quoted the Hong Kong-based Ta Kung Pao as saying.

The daily oil import of China stands now at about 2 million barrels or about 270,000 tons.

The figure will rise to 9.8 million barrels or 1.35 million tons by 2030, said the website article.

As early as in 2020, when China, as promised in the just-ended 16th National Congress of the Communist Party of China, sees its present gross domestic product quadrupled, China will overtake Japan's current annual oil import of 250 million tons and become the No 1 oil importer in the world, according to the article.

Moreover, the volatile situation in the Middle East and Gulf areas, a source of the world's nearly 70 percent exploitable oil reserve, also forces China to take some precautious measures.

A ten-point scheme

Quoting a government source, the article said that China's oil strategy in the 21st century will cover mainly 10 aspects: to diversify the sources of China's oil import; co-develop oil and gas wells with and in other countries; set up the national oil reserve and security guarantee mechanism; initiate the national oil foundation to construct a platform for oil finances and futures; re-start the National Energy Commission as the specific department to deal with the oil security affairs; cut out some reliable marine oil transportation lines; prepare four strategic oil preserves in northwest China; encourage a frugal and efficient oil consumption; organize a couple of titanic oil corporations; and restructure China energy consumption regime to reduce dependence on oil.

The central government is now looking into the likelihood and the relevant specifics of establishing a national foundation to support the oil reserves, oil supply to the remote area of China, oil exploration, and research and development of new types of energy.

With a capital volume of about US$10 billion, the foundation is expected to act as a special platform integrating China with the world oil market, for example the world oil futures, said the article.

During the 10th Five-year Plan period (2001-2005), China will set up its own strategic oil reserve mechanism.

The first step is to prepare, before the year of 2005, an oil reserve equivalent to a 30-day import, and 40-day by 2010.

Sinopec Corp., one of the biggest oil corporations of China, will double its oil stock to 10 to 12 million tons in the upcoming two or three years, Zhang Jiaren, Sinopec's deputy president, was quoted as saying by the article.

Repercussions to the world oil market

But will all this force China to depend too much upon the international oil market for oil? -- Not really.

Within the next three decades, China's dependence upon the international oil market will surely be well below 80 percent, and most likely not over 40 percent, the widely-recognized alarm level, Zhang Yaocang, Sinopec's deputy general manager, was quoted as saying by the Beijing-located International Finance News.

First, China can turn, as a substitute if necessary, to its ample coal resources, which make up 70 percent of its fossil energy mixture, Zhang said.

Second, China has huge resources of hydropower in its southwest region and along the Yangtze River. China can tap the trade-off between its oil and the hydropower, according to Zhang.

Third, China boasts of a great potential of more oil and gas reserve.

The prospected oil and gas reserves in China are 94 billion tons and 38 trillion cubic meters, which are respectively only 38 and 6 percent of China's exploration potential, far below the world's 45.6 and 22.4 percent.

With further exploration, China may well possibly turn out more oil and gas, Zhang said.

China will, throughout the following five to ten years, step up its exploration efforts at the basin areas in its northwest and northeast regions.

The already-made prospect in the three basin areas of northwest China's Tarim Pendi, Junggar Pendi and Turpan Pendi has turned out quite promising result.

The oil reserve in Junggar Pendi solely might be able to sustain a century long exploitation, the CNA article quoted experts as saying.

By PD Online staff Forest Lee

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