Understanding China's energy market

China's economic trajectory has driven its growing energy appetite, and it is now the world's second largest energy consumer in the world.

China will continue to be a major player in world energy markets, but increasing energy demands pose tremendous challenges for China's people, its environment, and its leaders, according to a new report on China's energy industry just published by Energy Business Reports, an energy industry think tank.
Report findings include:
Energy demand in China: China's energy demand has surged since the beginning of the new millennium when a new round of investment-driven economic growth began. China's energy sector has enormous potential, especially the coal, petroleum and natural gas industries, yet China is currently a net importer of oil, and imports are expected to increase to more than 900 million barrels in 2006, against a total demand of 1.993 billion barrels per year. China is looking to expand its production of coal, natural gas, and renewable energy sources such as nuclear, solar and hydroelectric power to meet the enormous appetite for energy spawned by its massive industrial complex and consumer sectors.
It is estimated that in 2020, China will need 2.8 billion tons of coal and 600 million tons of crude oil, two and a half times more than in 2000. Given this scenario, China will need to import 250 million tons of petroleum, about 70 per cent, from foreign sources. What's more, its carbon emissions will reach 1.94 billion tons, and China will likely overtake the US as the nation with the highest greenhouse gas emissions.
Industrialisation coupled with greater consumer energy consumption has created an energy crisis in China, and symptoms of shortage are visible throughout the country. New capital and international technology will be required, opening the door to foreign investment and market entry.
China opens itself up to global market forces: In recent years, China has allowed market forces to play a larger role in its economy. Foreign investors are being encouraged by the government to participate in exploitation of the country's natural gas resources, energy infrastructure construction, sales of natural gas, coal mining, gas-fired power generation and the production of petrochemical products. Shell, Exxon Mobil and BP are jostling for positions in China's gas market, where demand is expected to quadruple to account for 8 per cent of China's total energy supply by 2010. In order to tap China's growing energy market foreign companies are making heavy investments.
Environment: China is one of the biggest polluters of the developing world accounting for 12 per cent of global carbon dioxide emissions. In recent years, as concern about climate change and rising carbon dioxide emissions has grown, China has sent confusing signals about its willingness to clean up its energy production plant and tackle environmental pollution. China was among the 141 countries that ratified the United Nations' Kyoto Protocol on global warming, which took effect in February 2005. The move enabled China to portray itself as a defender of the environment while condemning the US, which withdrew from the treaty, as irresponsible. Yet despite throwing its weight behind the Kyoto treaty, China has few short-term solutions to satisfying growing energy demand beyond bringing new coal-fired power pants on line. China is planning 562 new coal-fired power stations, nearly half the worldwide total of plants expected to come online in the years up to 2012, when the first phase of the Kyoto Protocol ends.
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