China expects regional energy security concerns to intensify

Asian-Pacific nations can be expected to intensify their efforts to improve their energy security as North America achieves that goal, a senior researcher at China’s Energy Research Institute said. Yang Yufeng made that observation as he described conclusions Chinese policymakers reached as they prepared the country’s first Energy Outlook last year.

China potentially could produce natural gas from tight shale formations, but there’s a wide gap between it and the US shale gas revolution, he said during a presentation at the Center for Strategic and International Studies. “The United States already is heading toward energy independence. China is just beginning to work on it,” Yang said.

It expects both its own and global energy demand growth to slow down as China’s economic expansion slows down and the world recovers from economic recession. The Energy Outlook forecasts a 2 percentage point drop in domestic energy demand and a decline in global energy demand growth to 1-2%/year.

China will continue to rely heavily on coal to produce its electricity, but increasingly import LNG and increasingly try to improve its oil security, the report suggests. It said that within 5 years, North America will be oversupplied, Europe will reach a supply-demand balance, and the Asia-Pacific region will be undersupplied and faced with significantly higher prices.

Yang said China plans to work on improving its internal energy and economic structures while trying to develop new international alliances to address global market trends. “We need to strengthen international cooperation and increase energy sources with more bilateral arrangements,” he suggested.

The International Energy Agency was formed in response to industrialized nations’ concerns about possible shortages resulting from energy supply interruptions from resource-rich countries, Yang continued. “IEA may be very weak, but it’s absolutely the most effective international energy organization,” he said. “Maybe it’s time to build an entirely new one that includes China, India, and other developing countries.”

This will require greater recognition of differences between industrialized and developing nations, particularly when it comes to addressing global climate change and geopolitical concerns, Yang said. “Many developing countries are primarily concerned about supplies and solving local problems such as growing urbanization and the problems it creates,” he said.

“We need to identify very clear objectives, and it won’t be easy,” Yang said. “They will need to include climate change, which is a very hard, very long-term challenge we all will need to face.”

Contact Nick Snow at nicks@pennwell.com.

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