WATCHING THE WORLD ENERGY TRENDS IN RUSSIA, INDIA, CHINA

Peter Davies, British Petroleum Co. plc's chief economist, recently compared the energy characteristics of Russia, India, and China, three countries he believes hold increasing importance for the international oil and gas industry.

About 40% of the world's population lives in China, India, and Russia, respectively the world's first, second, and sixth largest populations. Sheer weight of numbers ensures that those countries will be important.

Davies said, "All three are undergoing fundamental structural economic change with great uncertainty surrounding the future level and pattern of growth in each."

ENERGY CONSUMPTION

Russia's energy consumption per person was above the average of Organisation for Economic Cooperation & Development (OECD) members until 1994.

China's per capita energy consumption was 20% above the average for the developing world. India's energy use was lower still, at only half the average per person for the developing world.

"Russia's energy demand has fallen more rapidly than its gross domestic product," Davies said, "but Russia now seems to be turning the macroeconomic corner.

"The lagging link between energy consumption and GDP implies that further reduction in energy demand can be expected. The future offers continued reductions in heavy industrial demand and growth in transportation and commercial uses."

China's core heavy industry remains very energy inefficient, but recent chemicals, electrical power, and heavy industrial process projects have been built with equipment closer to OECD levels of efficiency.

Light manufacturing, mainly for export, has been key to China's economic boom in recent years and to its declining energy consumption per unit of GDP.

INDIA'S GROWTH

Economic growth in India is:not expected to reach the recent heady levels achieved by China, Davies said, but the energy used per unit of GDP is expected to grow with the economy.

Recent economic reforms have boosted the Indian economy. Greater income has led to increased electrical power demand, greater availability of foreign exchange has lifted a constraint on Indian energy consumption, and motor transport is expected to grow quickly as foreign car manufacturers increase investments.

But Davies reckons a surge in Indian energy demand will occur only when the country is transformed from an economy with a large subsistence agriculture sector toward a broader based industrial economy.

"Forthcoming energy transition in these three countries looks set to impact international energy trade," Davies said. "Slow energy consumption growth in Russia seems likely to create the potential for increased exports of energy, especially of gas and potentially of oil.

"Indian energy growth is likely to be import based with domestic sources of oil and gas limited. China also is likely to become an increasing importer of energy. Oil production growth has failed to keep up with demand in recent years. China seems set to become an increasingly important oil importer"