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China seeks to better secure its natural gas supply as well as its supply of coal and production of crude oil. Photo: Xinhua

China targets energy security as risks from US rivalry grow

  • New five-year plan calls for more oil and gas production to better safeguard power supplies
  • Strained relations with major economies could pose security concerns for country’s essential fossil fuel imports, analysts say
China is putting more focus on energy security, with its latest five-year plan highlighting the need for higher oil and gas output as security risks rise along essential maritime trade routes.
The draft five-year policy released at the National People’s Congress (NPC) called for an energy strategy that would better secure the country’s coal supply, increase production of crude oil and natural gas and improve safeguards for its power supply. As part of a broader economic security blueprint the plan also called for oil and gas import sources to be more diverse and for the “safeguarding of the safety of strategic channels and key nodes”.

“We should strengthen the capacity of sustainable and stable energy supply and risk management … The core demand for oil and gas should rely on self sufficiency. We should maintain the stable production of crude oil and natural gas and increase output. Work should be carried out on layout planning and management of coal-to-gas strategic bases,” the report said.

This push for energy security is part of Beijing’s attempt to cut its dependence on other countries in strategically critical areas, as geopolitical rivalry between China and the US intensifies.

Apart from the energy sector, the Chinese government also stressed the importance of achieving food security and financial security in its latest five-year plan and it set the target rate of computer chip self-sufficiency at 70 per cent by 2025, up from 20 per cent now.

Analysts say Beijing’s growing emphasis on energy security coincides with increasingly strained relations with major economies that could pose security concerns for China’s oil and gas imports, upon which the country is heavily dependent. This includes potential risks to China’s energy supply routes in the South China Sea, the Strait of Hormuz and the Strait of Malacca connecting the Indian Ocean to the Pacific.
But Beijing’s push to secure coal, oil and natural gas supplies will be hard to square with its aggressive climate targets, including its longer-term goals to hit peak climate emissions by 2030 and become carbon neutral by 2060.

Ma Jun, director of the Beijing-based Institute of Public and Environmental Affairs, said the geopolitical landscape China faced meant energy security was a “more worrying and urgent problem”.

“China has always been known to be reliant on imported oil and gas, and it is something that the country is trying to change by ensuring more secure routes of supply for these resources,” he said. “In the long run, because we have natural advantages in developing solar and wind power, developing renewable energies is really the way forward for both our climate goals and energy security.”

China puts nuclear power on the front burner in bid to meet climate goals

China has said it will also move to further develop renewable energies, setting a goal of having 20 per cent of its energy come from non-fossil fuel sources by 2025, up from 15.9 per cent in 2020. In the annual government work report, China also said it aimed to cut its energy intensity by 13.5 per cent and its carbon intensity – a ratio of how much carbon is emitted relative to economic activity – by 18 per cent.

Zou Ji, chief executive and president of the non-profit Energy Foundation China, said the targets were a start, but that policies for the next five years still relied on coal and other existing energy resources. He said the country needed to move towards using a higher proportion of renewable energy as the “the most fundamental way to resolve the energy security issues”, and cautioned that coal could be a “grey rhino” – a probable but neglected threat – because it would take several years to transform China’s energy systems away from coal.

“We need to be clear about this direction and to take measures to head in this direction, rather than to increase the investment or the production capacity in coal,” he said. “If we don’t act now to make adjustments, there could be a big cost, a systemic risk or safety issue.”

Official figures showed that while China cut its coal use to 56.8 per cent of its energy consumption last year, its overall use of coal still grew by 0.6 per cent.

Zou, who previously worked under the National Development and Reform Commission (NDRC) on low-carbon development policy, said there were medium and long-term risks, including from the unpredictability of US policy towards China in the South China Sea, Iran and the security of oil routes from the Middle East.

“One issue is that China relies heavily on imports. More than 70 per cent of its oil and more than 40 per cent of natural gas is imported, and the imports all need to cross international maritime routes,” he said. “Another issue is the safety of China’s power system … maintaining its security and ensuring there is sufficient power during high-use periods.”

Last December, China suffered its worst power blackouts in a decade, outages that analysts said were caused by factors including higher-than-normal power use during a winter cold spell and by power plants that had reopened after the initial coronavirus outbreak in the country, along with a coal shortage caused in part by Beijing’s ban on Australian coal. Beijing restricted several Australian imports, including coal, in what was seen as punitive measures in response to Canberra’s calls for an investigation into the origins of the coronavirus in China.

Key takeaways from China’s annual government work report

Erica Downs, a senior researcher at Columbia University’s Centre on Global Energy Policy, said the draft plan’s emphasis on fossil fuel security was in line with recent elevated concerns about China’s oil and natural gas supply security, and coal supply security over the past winter.

“The concerns about oil and natural gas supplies are partly rooted in the US-China trade war, which has served as a reminder of the risks involved in relying on other countries for critical inputs into China’s economy, US sanctions on major energy exporters, the decline in China’s oil production in 2016 to 2018 and the natural gas shortages in the winter of 2017 to 2018,” she said.

Downs added that the focus on fossil fuel security might come from employment concerns – millions of people work in the coal, oil and gas industries – and because “short-term energy security concerns usually take priority over long-term climate objectives”.

Philip Andrews-Speed, a senior principal fellow at the National University of Singapore’s Energy Studies Institute, said Beijing’s emphasis on energy security was partly caused by renewed political tensions with key potential energy suppliers, including Australia and the US.

“They’re seeing a long-term problem related to wider trade frictions and maybe also issues of the South China Sea being progressively militarised,” he said.

But Andrews-Speed said there were tensions between China’s desire to produce more domestic oil and gas, while wanting state-owned enterprises to be more commercially oriented and also balancing those against environmental damage and carbon emissions.

“The nature of energy security is changing, but of course, China has anticipated that,” he said.

“It has an old-fashioned approach to security of materials supply, and there are certain things it can’t do – like iron ore and soybeans – but if it feels it can do something, like oil and gas, even if it’s expensive, then it will do it.”

Additional reporting by Kinling Lo

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