Wac Ncc100809 China’s Energy,Strategic Perspective

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Wac Ncc100809 China’s Energy,Strategic Perspective

  1. 1. San Diego World Affairs Council North County Chapter October 8, 2009
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  3. 3. Energy Resources <ul><li>Coal </li></ul><ul><li>Oil </li></ul><ul><li>Gas </li></ul><ul><li>Nuclear </li></ul><ul><li>Hydroelectric </li></ul><ul><li>Solar, Wind, etc </li></ul>
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  14. 14. Coal <ul><li>Shanxi is center of China coal industry </li></ul><ul><li>Low prices squeeze Chinese mine profitability & pull in imports </li></ul><ul><li>Causes China coal exports to fall </li></ul><ul><li>Closing small mines due to safety concerns; July shift </li></ul><ul><li>Logistics, Apr ‘08: 7-12 days supply </li></ul><ul><li>Coal imports from Australia & Indonesia </li></ul><ul><li>Smuggled coal from Vietnam </li></ul><ul><li>One coal-fired plant a week for a decade </li></ul><ul><li>Massive ‘Coal Bed Methane’ reserves; perhaps 10 tcm </li></ul>
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  27. 27. <ul><li>Oil Loading Pump at Port Sudan </li></ul>
  28. 28. Daqing Oil Field <ul><li>Discovered Sept 26, 1959 – 50 th Anniversary </li></ul><ul><li>20 billion barrels – light, sweet crude </li></ul><ul><li>Energy Independence for China; 1963-1993 </li></ul><ul><li>Peaked at 50m MT 1976; stable for 27 years </li></ul><ul><li>Down 20% from peak; falling 7%/yr </li></ul><ul><li>new gas focus; triple output to 10 billion cu m/yr </li></ul><ul><li>Extraordinary sandstone; 50% recovery </li></ul><ul><li>40% of cumulative domestic oil production </li></ul><ul><li>Daqing Oil Co #1 taxpayer in China </li></ul>
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  31. 31. Natural Gas <ul><li>Gas use rose 25% between 2006 and 2007 (E-W pipe) </li></ul><ul><li>Plan raise gas consumption to 10% of total energy use </li></ul><ul><li>Import gas via international pipelines and LNG </li></ul><ul><li>Turkmenistan & other Central Asia </li></ul><ul><li>The Sino-Myanmar gas pipeline will further increase China's gas import, which is projected to exceed 100 billion cubic meters over the next few years </li></ul><ul><li>Gorgon LNG contracts Australia </li></ul>
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  33. 33. Energy Pricing Issues <ul><li>Coal prices – free market since 2002 </li></ul><ul><li>Electricity prices heavily regulated in favor of industry </li></ul><ul><li>Widening differential; coal prices & coal power prices </li></ul><ul><li>State charging for sulfur oxide & NOX emissions </li></ul><ul><li>Oil product prices still controlled, but trend free </li></ul><ul><li>State-controlled prices stress companies in periods of rising prices </li></ul><ul><li>Muffled price signals restrain structural adjustments in both demand and supply </li></ul>
  34. 34. Oil & Gas Import Routes <ul><li>Ocean-going Tankers (from…) </li></ul><ul><li>Oil Pipeline from Kazakhstan </li></ul><ul><li>Gas Pipeline from Turkmenistan </li></ul><ul><li>Oil & Gas Pipeline(s) from Russia </li></ul><ul><li>Oil & Gas Pipelines from Myanmar </li></ul><ul><li>$50 billion contract for LNG from Gorgon </li></ul><ul><li>25% imported oil now from equity stakes abroad </li></ul>
  35. 35. Key LNG Terminals – Current and Proposed Terminal Name Status/Online Date Developer Initial / Expansion Capacity (MMcf/d) Possible Supplier Dapeng/ Guangdong Operational; Expansion: 2011 CNOOC, BP 650 / 520 Australia NWS Fujian Operational; Expansion: 2011 CNOOC 340 / 170 Indonesia - Tangguh Shanghai Construction: 2009; Expansion: 2012 CNOOC; Shenergy 390 / 390 Malaysia - Petronas Dalian Construction: 2011; Expansion: TBD PetroChina 390 / 390 QatarGas II Rudong/Jiangsu Construction: 2011; Expansion: TBD PetroChina/ Pacific Oil & Gas 460 / 460 QatarGas IV Zhejiang/Ningbo Approved: 2012; Expansion: TBD CNOOC 390 TBD Qingdao Approved: 2012 Sinopec, Huaneng Group 390 TBD Zhuhai Construction: 2010 CNOOC, Yudian Group 260 TBD Shenzhen Construction: TBD CNPC, CLP 390 TBD
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  39. 39. West-East Gas Pipelines <ul><li>CNPC released plans 3rd West-East Pipeline to run parallel to the second West-East line and ending in Shandong. </li></ul><ul><li>Cost $14.6b </li></ul><ul><li>From Turkmenistan & domestic Junggar fields </li></ul><ul><li>4 th & 5 th pipelines in pre-feasibility stages </li></ul><ul><li>4 th line may be fed by Tarim Basin gas </li></ul>
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  41. 41. Turkmenistan to China Gas Pipe <ul><li>First pipe completion planned for December 2009 </li></ul><ul><li>Length - 1,130 miles; 51” diameter; Cost - $7.5 billion </li></ul><ul><li>From fields on right bank of Amu Darya, across Uzbekistan, and Kazakhstan to China at Alashankou </li></ul><ul><li>Connects to West-East pipeline - Shanghai </li></ul><ul><li>Second parallel line to follow bringing 2-line capacity to 30 billion cu meters/year; completion – 2010/2013 </li></ul><ul><li>Pipe 2 to also tap Karachaganak, Tengiz, and Kashagan </li></ul><ul><li>July 2009 – CNPC 30-year deal Turkmenistan; 30bcm </li></ul><ul><li>30bcm = 50% of China domestic gas production 2007 </li></ul>
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  46. 46. Oil & Gas Pipes: Myanmar-China <ul><li>Construction of the US$1.5 billion oil pipeline and the $1 billion gas pipeline begin Sept ’09, is expected to be completed by 2013. CNPC holds 51%; MOGE – 49% </li></ul><ul><li>Burma gas fields, $5.6b Koreans & Indians; MOGE </li></ul><ul><li>Burma 10 th in world reserves at 2.5 trillion cu m </li></ul><ul><li>The natural gas pipeline will extend further from Kunming to Guizhou province running a total of 2,806 kilometers. It is expected to transport 12 billion cubic meters of gas to China every year for 30 years. </li></ul><ul><li>Oil pipeline 442,000bpd flow </li></ul><ul><li>Compared with ocean shipping, the oil pipeline can reduce the transport route by 1,200 kilometers </li></ul>
  47. 47. Natural Gas - Russia <ul><li>Kommersant: Aug 28, 2009 </li></ul><ul><li>Gazprom – puts on hold its Altai gas pipeline project between Western Siberia and China as uneconomical; Gazprom to focus on Sakhalin </li></ul><ul><li>Russia now talks of building LNG facility at Vladivostok. </li></ul>
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  51. 51. Nuclear Power Status <ul><li>11 nuclear reactors in place </li></ul><ul><li>9,100 Mw installed capacity </li></ul><ul><li>2% of total electricity generation </li></ul><ul><li>World leader - current & planned construction </li></ul>
  52. 52. Nuclear Power Future <ul><li>24 new reactors by 2020 </li></ul><ul><li>Sector capacity ~ 40,000 - 65,000 Mw </li></ul><ul><li>4-5% of total electricity generation </li></ul><ul><li>2030 – plan 250,000 Mw; 16% total power capacity </li></ul><ul><li>Kazakhstan supply 24,000 tons Uranium, 2020 </li></ul><ul><li>New modular 4 th generation technology of Chinese design </li></ul><ul><li>CN Experimental Fast Reactor; HTGR’s </li></ul>
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  54. 54. SOLAR POWER <ul><li>Beijing’s aim is to generate 20,000 megawatts of solar energy by 2020 — or less than half the capacity of coal-fired power plants that are built in China each year. </li></ul><ul><li>China is world leader in many segments of the solar power supplies market – strength in manufacturing. </li></ul>
  55. 55. Trades Dollars for Oil Rights <ul><li>loaned out about $45 billion to Russia, Brazil, Venezuela, Kazakhstan and Angola in exchange for access to oil supplies. </li></ul><ul><li>New sources crude require new refining </li></ul><ul><li>For ESPO oil expand Liaoyang refinery NE CN </li></ul><ul><li>Addax – bought by Sinopec (Kurdish & African oil) for $7.2 billion; closed Oct 5; PetroChina & BP Rumaila </li></ul><ul><li>Yanzhou buys Aussie coal co Felix Resources, $2.9b </li></ul><ul><li>PetroChina buys 60% Athabasca Oil Sands Co; 5bbl </li></ul><ul><li>CNOOC offers $17 billion for 84% Repsol YPF (ARG) </li></ul>
  56. 56. Strategic Oil Reserves <ul><li>2001 – launch Strategic Petroleum Reserve (SPR) </li></ul><ul><li>Phase 1: 103 m barrels in 4 places; 25 days; done 2009 </li></ul><ul><li>Phase 2: raise to 270 m barrels; done 2011 </li></ul><ul><li>Phase 3: raise to 500 m barrels; no timetable </li></ul><ul><li>Commercial storage: estimated at 300 m barrels </li></ul><ul><li>Govt plans 80 m barrel products storage </li></ul><ul><li>Commercial storage of products 252 m barrels by 2013 </li></ul>
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  58. 58. Strategic Issues <ul><li>Straits of Malacca: roughly 80% of China's annual imports of 1.5 billion barrels of oil pass through the narrow seaway, which separates Malaysia from Indonesia. Chinese analysts and leaders have been describing the strait, as a strategic vulnerability. </li></ul><ul><li>US Navy </li></ul><ul><li>India </li></ul><ul><li>Violence in Central Asia; Xinjiang; Afghan spillover </li></ul><ul><li>Straits of Hormuz </li></ul><ul><li>Climate Change </li></ul>

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