Chinas Oil and Gas Perspective and Issues to Secure Supply Presented at the International Energy Wor

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Chinas Oil and Gas Perspective and Issues to
Secure Supply Presented at the International
Energy WorkshopJointly Organized By EMF, IEA and
IIASAon 18-20 June 2002 at Stanford
UniversitybyYUAN Guohua1 ZHANG Dawei2 1.
Chinese Academy of Land and Resource Economics,
PO BOX 259, BEIJING 1011492. Strategic Research
Center for Oil and Gas, MLR
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TOPICS

• OIL AND GAS RESERVES
• SUPPLY AND DEMAND PERSPECTIVES
• PRINCIPLES AND GUIDELINES FOR SECURE OIL/GAS
  SUPPLY
• ISSUES TO SECURE CHINAS OIL AND GAS SUPPLY

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OIL AND GAS RESERVES

• Some Remarks on Coal
• Coal reserve sums up 11.6 of the world total.
  Coal reserve is allocated very asymmetrically
  across the country. 94 of Chinas total coal
  reserve is located in the North of Kunlun
  Qinling Dabie Mountains, 89 is located in the
  West of Da Xinanling Taihang Xuefeng
  Mountains. About 76 of the anthracite is located
  in Sanxi and Guizhou Provinces, 80 of the coking
  coal is located in North China.

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Oil Reserve Till the end of 2000, Chinas
accumulated proven oil reserve is 21 billion
tons 74.21 of it is located in Eastern China ,
with the Western Region 19.16 and offshore oil
6.63 respectively. China's oil and gas are
located in the most promising 11 basins out of
more than 500 sedimentary basins. It is
estimated the proven oil reserve is just about
23 of the total oil resource. Till 1999, the
exploited oil reserve is about 15.5 billion tons,
75 of the total reserve.
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Gas Reserve

• The accumulated proven gas is 2555 billion m3,
  72.67 of which is located in Western China, and
  13.08 in Eastern and 14.25 offshore gas.
• The proven gas reserve is about 7 of the gas
  resource.
• The exploited gas reserve is 109 billion m3, 53
  of the total gas reserve.

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SUPPLY AND DEMAND PERSPECTIVES

• From 1996 on, Chinas oil production reached and
  maintained at over 150 million tons, and gas
  production from 20 to 25 billion m3.
• Demand keeps growing. In 2000, Chinas oil
  consumption exceeded 230 million tons, with a
  domestic supply gap of 70 million tons had to
  rely on import.
• It is predicted that Chinas economy will grow at
  an annual 7 rate, and the oil consumption grow
  at 4 annually with domestic production grow at
  2 annually in the next 15 years. The gap also
  keeps growing.
• In 2005, Chinas oil consumption will exceed 250
  million tons, with a gap over 80 million tons
  and in 2015 the consumption is 320 million with a
  gap over 130 million tons.
• As for gas, because of its little portion in
  energy consumption, China is now enhancing the
  infrastructure for gas consumption.

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Energy Structure

• In production, coal shares from 91.4 in 1962 to
  68.2 in 1999 oil shares from 4.8 in 1962 to
  20.9 in 1999 gas and hydr-oelecteicity shares
  from 3.8 to 10.9 in 1999.
• In consumption, coal shares from 89.2 in1962 to
  67.1 in 1999 Oil from 6.6 to 23.4, oil and
  hydro-electricity from 4.1 to 9.5.

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PRINCIPLES AND GUIDELINE FOR SECURE OIL/GAS SUPPLY

• Target for Secure Oil Strategy
• Strategic Point Guarantee and Quicken the
  Development of National Economy
• Integrating Oil Safety into the Energy Strategy
  and National Economy Safety
• Strategic Thinking From Domestic Supply to the
  Sharing of World Resource
• Strategic View Build Stable an Safe Oil Supply
  Mechanism

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Guideline for Secure Oil Strategy

• Deepen the reform of oil/gas industry, promote
  the sustainable development of domestic oil/gas
  industry, make best use of overseas oil/gas
  resources, buildup energy saving economy and
  society.
• Increase the capacity to handle incidents, secure
  long term safe oil supply and guarantee the
  continuous and rapid development of national
  economy.

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Main Purpose Guarantee and Quicken the
Development of National Economy

• Secure safety oil supply is a guarantee for the
  development of economy.
• Quicken the development of domestic oil industry
  and reduce the risk.
• Development of National Economy is the premise to
  share world oil resource.

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Integrating Oil Safety into the Whole Energy
Strategy and National Economy Safety

• Based on Chinas resource conditions and
  consumption trends, the development of coal, oil
  and gas, nuclear energy and renewable energy
  should be coordinated.
• Dominated by coal, improve structure, develop
  clean energy, increase energy efficiency, limit
  the dependency of economy to oil in a reasonable
  range.

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Strategic Thinking From Domestic Supply to the
Sharing of World Resource

• Accompanying the development of economy, the
  dependency to foreign oil is increasing.
• The expected increasing gap between domestic
  supply and demand is related to world economy
  integration.
• Make adaptation to the integration and global
  reallocation of world oil, make best use of two
  kinds of resources and markets.

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Strategic View Build Stable Oil Supply Mechanism

• Oil safety is an important part of national
  economy safety, related to politics, foreign
  relationships, military and other aspects.
• Create a good intl environment for securing oil
  supply by politics and foreign relations,to
  reduce confrontation and seek for cooperation.
• Increase Chinas role in intl oil trade and
  cooperation.

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ISSUES TO SECURE CHINAS OIL AND GAS SUPPLY

• Strength Oil and Gas Exploration
• Develop Natural Gas
• Use Overseas Oil by Cooperation
• Buildup Oil Stockpile System
• Buildup An Oil-Saving Economy

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Strength Oil and Gas Exploration

• Secure basic domestic oil supply by strengthening
  exploration.
• Increase backup oil reserve to maintain domestic
  oil production of 160-200 Mt, and keep the
  reserve/production ratio between 151 to 201.
• Introduce new theory, new tech and new investment
  mechanism in oil exploration. Try to keep the oil
  supply ration in 60 before 2010, and 50 before
  2020.

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Develop Natural Gas

• Increase the production and consumption of gas.
  Increase the ration of gas consumption of 2.1 to
  10 in 2020.
• Increase domestic gas production to 110 Bm3, and
  import 80-100 Bm3 in 2020?
• Develop the gas in Shannxi, Gansu and Ningxia
  area and form the Northern gas network.
• Develop gas in Qinghai and Xinjian area (also
  import from Central Asia) and construct the
  Western Gas Piped to East Region system.
• Develop gas and oil in East China Sea and South
  China Sea (with other Regions).

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Use Overseas Oil by Cooperation

• Open-up the oil import trade and utilize two
  types of resources and markets . Diversify the
  sources, means, products and ways of oil import
  and minimize the risk.
• Improve the relationships with Middle-East Asia,
  Central Asia, Russia and other countries, share
  intl oil and gas by cooperating exploration and
  exploitation abroad.
• Develop overseas oil production bases and keep
  that production over 50 Mt in 2020.

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Buildup Oil Stockpile System

• Buildup an oil stockpile system incorporating
  state and companies, dominated by state
  stockpile.
• Its reported Sinochems stockpile is about 7.5
  Mt (include crude oil and products), so I
  formulated China's present oil stockpile is about
  15 Mt.
• If the amount of stockpile should be 90 days
  consumption, I suggested Chinas oil stockpile be
  80 Mt and be achieved in 2010.

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Buildup An Oil-Saving Economy

• Chinas per capita oil resource is about 1/6 of
  the world average. Energy efficiency is 32,
  about 10 less than the advanced level. Oil
  consumption of per 1000 USD GDP is 0.26t in 1997,
  3.3 times that of Japan, 2 times of US. Great
  energy/oil saving potential.
• Chinas energy saving ratio is about 5 in recent
  years.
• Improve industrial and products structure.
  Implement Energy Saving Act by using investment,
  finance and tax, pricing and other means to
  promote oil saving production, and build an oil
  saving social and economic system.