China’s Energy Diplomacy FES Briefing Paper 13| August 2007 Page 2 1 Introduction One of the five essential elements for the surviv­al of people, energy functions as a core strategic material for national economies and social de­velopment. The security of energy supply is not only associated with the rapid growth of the economy in China but also with the overall secu­rity and strategic development of the nation. The sustainable development of the Chinese econo­my is closely related to the sustainable develop­ment of the world economy. Thus China’s ener­gy security is a very important part of global energy security; China’s energy diplomacy there­fore has great implications for global energy se­curity. Owing to China’s rapid economic growth, along with its increasing need for energy optimization, China’s crude oil consumption has multiplied. In 2010, China’s oil consumption will reach 350­380 million tons; consumption of natural gas will increase from 24.5 billion cubic meters to 100­120 billion cubic meters. However, in 2010 do­mestic supply will have increased only moderate­ly, reaching an amount of 170 to 190 million tons. Thus increasing demand for oil will have to be met mainly through imports. Domestic pro­duction of natural gas will increase drastically, reaching 80 to 100 billion cubic meters in 2010, while additional imports will still be needed to meet demand. 1 Thus energy diplomacy has be­come more and more important for China’s energy security. The“Petersburg Declaration” of the G8 Summit in 2006 laid out the principles, aims and propo­sals for action, and it constitutes a very meaning­ful framework for a global, cooperative energy policy, stressing open, transparent, efficient and competitive markets, transparent, equitable, stable and effective legal and regulatory frame­works, enhanced dialogue on relevant stakehol­der perspectives, environmentally sound deve­lopment and use of energy, etc. The present article seeks to illustrate the current situation of China’s energy development, to identify the problems the Chinese government has been facing, and to work out the key ele­ments of China’s energy diplomacy. The objecti­ve is to fathom the commonalities between Chi­na’s energy diplomacy and global energy policy, to identify compatible interests, and to point out 1 The data comes from:“China Industry Annual Re­port,” China Economic Information net, www.ceiceo.cn/Exweb/2005Report/www/AdInfo.as p?Id=6# 石油 , cited in Xu Qinhua, New Geopolitics: Central Asian Energy and China, Beijing 1997: The World Contemporary World Publishing House. areas of potential conflict. By comparing the framework for a global, cooperative energy poli­cy outlined in the“Petersburg Declaration” with China’s energy diplomacy, we can explore the kinds of circumstances and conditions under which China would be willing to contribute to solving global energy problems. 2 Overview of the Development of China’s Energy Industry: Achievements and Problems Based on its development over the past fifty plus years, China’s energy industry has achieved an outcome that catches the attention of the entire world. The capacity of energy supply has been strengthened step by step. In 2005, the total output of primary energy in China reached 2.06 billion tons of standard coal, which was 87 times that achieved in the period shortly after the founding of the new China as well as 3.29 times of that posted during the early period of the po­licy of reform and opening. The output of coal amounted to 2.19 billion tons, ranking first in the world for years. The country’s output of cru­de oil reached 181 million tons, ranking sixth in the world. Its output of natural gas amounted to 50 billion cubic meters. Its power generation and installed capacity exceeded 500 million KW. Its annual power generation reached 2474.7 billion KWh, ranking on average second in the world. Renewable energies have been developing quickly over the past few years. The installed ca­pacity for SHP stations has reached 38 million KW. The total solar collector area of solar water heaters was equivalent to 80 million square me­ters, which accounted for over half of the amount installed in the world. The installed ca­pacity for nuclear power plants reached almost 7 million KW. The country’s annual output of me­thane amounted to around 8 billion cubic me­ters. The amount of methane-generating pits for family use reached more than 17 million. 2 In addition, the structure of China’s energy con­sumption was optimized. In 2005, consuming energy totaling 2.225 billion tons of standard coal, China became the second largest energy­consuming country in the world. Over recent years, based on efforts to actively modify the energy consumption structure, the general trend has been characterized by a relative decrease of coal consumption and a gradual relative increase in the consumption of high-quality clean energy. From 1990 to 2005, the ratio of coal consump­tion dropped from 76.2% to 68.7%, that of oil/gas consumption increased from 18.7% to 2 The data comes from The Ministry of Land and Re­sources P.R.C.