Energy Policy 53 (2013) 381–388

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Challenges and countermeasures of China’s energy security

Wensheng Cao a,c,n, Christoph Bluth b

a College of Mechanical Engineering, Jimei University, Xiamen 361021, Chinab School of Politics and International Studies, University of Leeds, Leeds LS2 9JT, UKc Research Center for Cleaning Combustion and Energy Utilization of Fujian Province, China

H I G H L I G H T S

c Conception of energy security and energy policy in China’s grand strategy are expatiated.c Challenges China is facing are analyzed from 4 aspects.c New strategic thoughts of China including 6 capability enhancements are raised.c Major tasks of safeguarding energy security contain 3 measures of improvement.

a r t i c l e i n f o

Article history:

Received 23 December 2011

Accepted 31 October 2012Available online 22 November 2012

Keywords:

Energy security

Challenge

China

15/$ - see front matter & 2012 Elsevier Ltd. A

x.doi.org/10.1016/j.enpol.2012.10.070

esponding author at: College of Mechanical E

02, No.142, Yindou Road, Jimei District, Xia

6 592 606 1882; fax: þ86 592 618 3523.

ail addresses: caows@163.com, wscao@hotma

a b s t r a c t

China is now a major consumer and importer of energy, and its choices and policies will increasingly

affect the rest of the world. This paper analyses the key features of China’s energy policy as it faces the

prospect of possible challenges to its energy security given the increasing reliance on fuel imports and

the need to transform its energy to meet the requirements of a modern, fast-growing economy. The

paper examines whether the current energy mix is appropriate and sustainable, and considers the

China’s policymakers new emphasis on energy efficiency, conservation, renewable energy and the shift

to natural gas the primary energy source. It examines the internal and external constraints on China’s

energy policy and considers the strategic dilemmas arising from China’s increasing involvement in

international energy markets. It concludes that both the domestic and international implications of

China’s search for energy security will confront policymakers with hard choices that will affect not only

energy policy, but also China’s geopolitical grand strategy.

& 2012 Elsevier Ltd. All rights reserved.

1. Introduction

Energy is an important physical base of economic develop-ment, social progress and the construction of modern civilization.And it is also a strategic material and major element of a country’ssecurity, which links national and foreign security policies. Energyis becoming more and more important along with competition ofworld energy market and rising concerns about energy security.

Energy security is a systemic issue involving engineering,politics, economics, energy, environment, diplomacy and militaryaffairs (Wu and Li, 1995; Price et al., 2011; Zhang et al., 2010;Philip, 2009; Fan et al., 2011; Zhao and Ortolano, 2010; Li, 2011;Bambawale and Sovacool, 2011; Wu et al., 2011). The concept ofenergy security has become commonplace in political and aca-demic discourse as one of the principal issues on any country’snational agenda. It is commonly defined in terms of three key

ll rights reserved.

ngineering, Jimei University,

men 361021, Fujian, China.

il.co.uk (W. Cao).

factors: reliability, affordability and environmental sustainability.Reliability means that energy supply in the quantity and form issecure. Affordability means that energy is available at a price thatcan sustain and promote economic growth (Shaffer, 2009). TheInternational Energy Agency also distinguishes between short-term and long-term energy security. In the short-term, states maybe vulnerable to sudden changes in supply and demands. In thelonger term, security of supply will depend on economic devel-opments and environmental needs, given the fact that ultimatelynon-renewable energy resources are finite.

The existence of a global market in oil and any country withsufficient financial resources is able to provide for all its energy needsat a globally determined price. Since China is the world’s largestproducer of coal and can almost meet its entire demand from nationalresources, access to coal is not an issue in the medium term. With theincreased emphasis on gas as a source of energy for domestic andindustrial needs, there are supply issues given the persistence ofmajor price differences between world regions and transport infra-structure (pipelines and LNG terminals) are an important factor.

Thus the question arises to what extent this definition of the term‘‘energy security’’ is meaningful. The case of China is interesting in

W. Cao, C. Bluth / Energy Policy 53 (2013) 381–388382

this regard, as China was able to rely on domestic energy sources andhas only recently become dependent on the large-scale import of oiland other forms of energy. Energy is a key factor in the rapideconomic development of the country. Given the extensive controlthe state exercises over the economy, the management of energyresources is crucial and requires China’s government to play a muchmore intrusive and pro-active role in this process than is the case inother major economies. According to the literature, the United Statesdoes not appear to have a consistent energy policy—this is somethingthe Chinese government could not afford as it needs to ensure notonly the supply of energy, but also control the precise mix of differentforms of energy for different sectors of the economy. The Chinesegovernment is planning to diversify internal energy production andas well as imports, with a particular emphasis to increase the outputof natural gas and the facilities that enable the importation of LNGand nuclear energy (Asif and Muneer, 2007). China has maderemarkable progresses in key technologies of coal gasification, directand indirect coal liquefaction, and the development of the coalpolygeneration energy system (Nolan et al., 2004; Rong and Victor,2011). In the early 21st century, the coal chemical industry in Chinawill be oriented to the development of high efficiency, safety,cleanliness, and optimum utilization, which will alleviate environ-mental pollution caused by coal combustion as well as reduce thedependence on oil imports (Xie et al., 2010). At the same time, theprospects for China to increase domestic oil and gas production islimited, and even the extraction of coal is becoming more expensive.As China’s GDP per head is still very low by global standards, it isclear that economic activity and therefore energy consumption is setto increase very substantially in the medium term. Consequently, aswe have discussed, the volume of oil and gas that China will need toimport is going rise. In order to meet future needs, China will need toincrease China’s dependence on the energy trade.

The relation between energy and national security is subtlebut significant. Christie et al. (2010, p.66) emphasized that‘‘energy security is national security’’ and identified crude oil asa strategic commodity that is ‘‘indispensable for core functions ofmodern economic systems (and national defence)’’ and cannot besubstituted in the short or medium term. In particular, oil remainsindispensable to the transport sector (Korin and Woolsey, 2008).Any state therefore has to identify the main risks to its oilsupplies and assess realistically the likelihood of the occurrenceof events that can interfere with the uninterrupted supply of oil atacceptable prices. The extent to which such risks can be reduceddepends on their nature and the means required to address them.The assessment of such risks depends on a range of variables suchas the oil import dependence ratio, the oil intensity of theeconomy as well as the total level of imports, the security anddiversity of transit routes, the diversity of sources of supply, therisks to supplier countries and the risks of natural disasters(Christie et al., 2010, p.67).

Although China does not face any direct challenge to its supplyof energy, its increasing dependence on imports has strategicconsequences since it requires increasingly deeper integrationinto global financial and energy markets while at the same timeraising geopolitical issues in relation to China’s role in the regionas well as its relations to other major powers such as Russia,Europe and the United States. The United States control andprotects international shipping lanes that are needed for oiltransport, while Russia perceives itself to be the hegemon inEurasia who controls its energy resources. Moreover, the strategicconflict between the United States and Iran and the problemsaffecting other regions where China is investing to diversifysupply means that energy security becomes connected to broaderissues in China’s foreign policy and what is traditionally under-stood as national security. There are also domestic political issuesas the legitimacy of the Chinese government is wholly dependent

on its ability to deliver uninterrupted economic growth, which inturn is contingent on energy security as defined above. Finally,there are the long-term issues raised by environmental sustain-ability and global energy reserves.

This paper is concerned with an analysis of China’s energypolicy, how China has prioritized security of supply and how ithas managed the multiple challenges that is has faced. It con-siders the causes of the recent shift towards energy efficiency andconservation and looks both at the domestic and geopoliticaldimensions of China’s energy policy with a particular focus on theimplications of China’s requirements for oil imports in terms oftheir long-term material and political sustainability. The paperwill argue that while China will continue to be able to accessglobal oil markets, it will real choices in terms of constraints on itsforeign and security policy.

2. Energy policy in China’s grand strategy

The internationalisation of China’s energy policy and in parti-cular the inexorable rise in the volume of oil imports has far-reaching strategic consequences for China. On one level, theintegration with the global economy that is a prerequisite for apolicy by an autonomous government of economic developmentfocussed on the creation of export industries is in line with thisapproach to energy security. As Andrews-Speed and Dannreuther(2011, p.103) have pointed out: ‘‘In terms of its economicstructures an energy dependence, China’s interests lie logicallymore with other large oil-importing states, such as the UnitedStates, Japan and EU, than with oil-producing states’’. Moreover,there has been an understanding in the United States and Chinathat energy policy is potentially a very significant vector ofcooperation between the two major powers. Reliance on large-scale energy imports is a common factor in the foreign economicpolicies of the two largest economies in the world which havedeveloped a remarkable degree of interdependence due to thelarge holdings by China of US external debt and the significance ofthe United States as an export market for China’s industry. Ifdiversity of supply is an indispensable element of energy security,the challenge for China lies in combining diversification ofimports with the minimization of risk that arises from thegeopolitics of oil resources and supply routes. The Chinesegovernment itself has emphasized that, in the words of PremierWen Jiabao at the 2006 Euro-Asian Summit, ‘‘geopolitical disputesshould not stand in the way of global energy supply and energyissues should not be politicized’’. (Speech at the Sixth ASEMMeeting, Helsinki, 10–11 September 2006) Nevertheless, strategicrelations with the United States and the geopolitics of the regionaffect China’s foreign policy choices that potentially impact onenergy import policy and vice-versa. In the United States, therewere two competing narratives at the beginning of the newcentury in relation to the rise of China as a major economic andpolitical power. The one that dominated thinking in the earlyBush administration saw China as a rising competitor whoseinterests would inevitably clash with those of the United States.This perspective was articulated by proponents of neo-realismlike Mearsheimer (2001, p. 402) who believed that China wouldchallenge the United States with regard to its position in theinternational system as it became a world economic and militarypower. The manifestation of China’s challenges to US hegemonywere the efforts to depict the world as multipolar rather thanunipolar, the development of a Sino-Russian axis by way of theShanghai Cooperation Organisation, a security organisation inEurasia that explicitly excluded the United States, and thechallenge to the US position in North East Asia with regard toTaiwan, North Korea accompanied by a substantial effort to

W. Cao, C. Bluth / Energy Policy 53 (2013) 381–388 383

accelerate military modernisation, including increasing Chinesenaval capabilities and developing China’s military and civilian spaceprogram. After the events of 9–11, when international terrorismbecame the focus of global security, this approach gave way to amore benign in interpretation of Chinese foreign policy. China’sefforts to reassure the international community with respect to the‘‘peaceful rise of China’’ and to be a good international citizen byadopting international norms, including the signing of the NuclearNon-Proliferation Treaty and adopting export standards for so-called ‘‘dual-use’’ goods enhanced the image of China as a ‘‘tradingstate’’ rather than a ‘‘military-territorial state’’. This means thatWestern states are pursuing a partnership with China based ontrade and mutual cooperation rather than strategic rivalry. Thatdoes not imply however that all potential sources of strategicconflict have been eliminated. The Western perception is that Chinaremains an autocratic country that advances a rival model ofmodern development to that of the West, refusing to adoptdemocratic institutions and norms and only partially acceptingthe international norms that underpin the Western view of theinternational system. Although increasing the Chinese political elitehas adopted some of the discourse of liberal and constructivistapproaches that emphasizes cooperation, ‘‘soft power’’ and movesaway from the discourse of multipolarity which implies balancingUS power, the old habits of seeing the world in purely realist termsdie hard. Indeed the concept of national sovereignty remains at thecore of China’s approach to international relations, which compelsChina to oppose international sanctions and humanitarian inter-ventions against states that are perceived in the West to threateninternational security or engage in severe human rights violationsagainst their own populations. Two particular crisis regions affectboth China’s relations with the West with some implications forenergy policy. The first is the Middle East, where China’s refusal togo along with meaningful action against the Assad regime in Syriadespite the war it is fighting against elements of its own populationhas led to serious disenchantment with Beijing. More importantly,China’s role in the dispute with Iran over its nuclear program hasbeen to constrain US efforts to use sanctions as a tool of coercion.As the United States with the support of the United Nations SecurityCouncil has effectively shut out Iran almost completely from theinternational energy markets, China’s continued imports of energyfrom Iran and investment in Iran’s energy industry undermines oneof the highest national security priorities of the United States andits allies. While for the time being this is tolerated by Washington,the escalating conflict with Tehran means that the time isapproaching rapidly when this may no longer be sustainable. InChina, on the other hand, the perception prevails that US foreignpolicy towards the Middle East consists in the pursuit of Americanhegemony in the region in order to secure access to oil supplies.This is the dominant interpretation of the 2003 Iraq War in Beijing,which gave the diversification of oil supplies to various regions highimportance (Alterman and Garver, 2008). Similar points of conflictexist in other parts of the world, particular in Latin America whereChina’s relations with Venezuela are inimical to US interests, andAfrica where China is gaining increasing influence but has to rely onthe support of dubious and troublesome regimes.

Most of China’s oil imports are transported by the sea and forChina this raises the question of diversification of routes inaddition to that of supply. Most of the oil transport for Chinagoes through the Straits of Malacca, a potential chokepoint if apotential adversary sought to interdict oil shipments to China.If for some reason a military dispute with the United States wereto escalate (say over Taiwan), then the interdiction of oil suppliesto China would be conceivably an element of the confrontation.There are lower level, less predictable risks affecting the transportof oil on the high seas that could include terrorism or piracy orshipping accidents and extreme natural catastrophes. For this

reason China has decided to shift at least some of the oil transitaway from the Straits of Malacca.

Another form of route diversification would be increased reli-ance on pipelines. However, closer convergence between regionalpowers, notably Russia and China have not yet made the contribu-tion to China’s energy security that was expected given that Eurasiais so rich in hydrocarbon resources. In the 1990s a Sino-Russian axisappeared to be emerging, but ultimately the national interests andpolitical cultures of both countries were too divergent to permit thedevelopment of a full strategic partnership (.Lo, 2008). Bothcountries were not prepared to sacrifice their relations with theWest, as they were in a long-term process of a fundamental shift inthe balance of power between them. Russia has so far failed tobecome the major partner for China in energy policy and Russia’senergy exports are going to Europe. This has resulted in Chineseefforts to reach out to Central Asia. The Euro-Asian region lies at theboundary between Europe and China and shares a long land borderwith China. This border was heavily disputed in the past, resultingin military clashes between China and the Soviet Union. Moreover,the Chinese province that borders Kazakhstan, Xinjiang province,represents a major public order problem for China itself as a resultof Uighur separatism. The weakening of Russian control overKazakhstan and the presence of substantial natural resources,especially oil and gas, mean that China now has important strategicinterests in the country. These are particularly important for China,where security of energy supply is a key strategic objective.Kazakhstan and China are emerging as an important energypartnership, with significant investment by Chinese companies inKazakhstan’s hydrocarbons sector and large volumes of exportsfrom Kazakhstan to China. In 2010, almost a quarter of China’soverseas equity oil production came from Kazakhstan. An interna-tional oil pipeline from Kazakhstan to China was built and beganoperating in late 2006, and its second phase project has been underconstruction from Dec. 2007 with completion due by 2013, whichwill have 1362 km length and transport 20 million tons crude oilper year. Sino-Russian rivalry in Central Asia is fairly muted at leastin terms of rhetoric, as China needs Russia to balance the West tosome extent (Bluth, 2002). China is working to increase its influencevery quietly and gradually (Andrews-Speed and Dannreuther,2011). China is prioritising Euro-Asia over Russia as an energypartner not to further geostrategic goals in the region, but rather tosecure the stability and integration of Xinjiang province while at thesame time enhancing its access to energy sources that do not relyon transport through sea lanes controlled by the US navy.

The central dilemma of China’s international energy policy,namely to maintain secure and reliable supplies of oil and gaswhile avoiding excessive dependence on the Middle East, istherefore closely connected with the other dilemmas of China’sforeign and security policy. China’s foreign policy is rooted in aconceptualisation of the international system that is closed linkedto the conception of state identity and the internal legitimation ofthe regime which is subject to external challenge. This explainsboth the efforts to meet all energy needs from domestic sourcesas much as possible as well as the simultaneous integration intothe international economy and energy trade. China’s energypolicy is an important factor in relation to China’s grand strategy.However, in future China’s energy policy may put pressure on thegovernment to modify its approach to international relations.There is a real tension here which may mean that in futurecurrent policy will prove unsustainable.

3. The challenges of China’s energy policy

A booming domestic economy, rapid urbanization, rising exportprocessing and the Chinese people’s voracious appetite for cars are

Table 2China’s crude oil imports by region.

Source: Zweig and Fianbai (2005), Li (2011).

Percentage

of total supply

Middle

East

Africa Europe and Western

Hemisphere

Asia-Pacific

1989 41.3 0 0 58.7

1994 39.7 4.1 0.8 55.4

1999 46.2 19.8 15.4 18.7

2003 50.9 24.3 9.6 15.2

2004 45.4 28.7 14.3 11.5

2009 47.8 30.1 17.3 4.7

W. Cao, C. Bluth / Energy Policy 53 (2013) 381–388384

giving rise to an unprecedented demand for resources and makeChina’s energy security facing much more rigorous challenges.

3.1. Heavy pressure on energy supply

China’s consumption accounts for about half of the growth ofworld oil consumption in the last ten years. China is the world’ssecond-largest consumer of energy, the world’s largest producerand consumer of coal, and second-largest producer of electricity.The proportion of China’s energy sources is coal 70.2%, oil 19.0%,hydro 6.3%, gas 3.7% and nuclear 0.7%, which differs significantlyfrom that of most industrialized countries. It is predicted that thegross energy demand of China reach 3.8 billion tons of standardcoal in 2015. This means China is likely to become the world’slargest energy consumer, and consumption will reach 4.2–4.5billion tons by 2020 and 5.5 billion tons by 2030. It is also forecastthat the dependence on foreign energy, oil and gas will rise from8.8%, 51.2% and 5.8% in 2008 to 15%, 60% and 30% in 2015,continue to be up to 25%, 70% and 50% in 2030 (Wang et al., 2011).

Energy resources of China are unevenly distributed across thewhole country that is vast in size, and the major centers ofconsumption are located in the southeast coastal region far fromthese domestic sources. Furthermore, the energy efficiency ofChinese industry is low. It consumes 50% more energy per unit ofGDP than advanced countries. Due to uneven distribution, lowenergy efficiency and an inefficient power grid structure, it is hardto meet the rising energy demand solely by improving of supply(Vivod, 2009).

Obviously, in the three essentials of energy security, Beijinggives the highest priority to reliability of supply pushes its oilcompanies to acquire overseas energy suppliers and infrastruc-ture around the globe (see Table 1). This action out of market-driven energy policy is driven by the government goal to mitigatethe dependence on the international market, because crude oilprice continues to rise and the growth rate of energy use hasalready exceeded GDP growth. Thus, China wants to rely less onmarket exchanges and more on long-term trading contracts,which tends to create more opportunity for interaction betweengeopolitics and energy security (Ma et al., 2012). As we have seen,this has significant strategic implications for China’s internationalrelations. China’s crude imports by region are shown in Table 2.

3.2. The negative effect of greenhouse gases emissions

The global climate change is exacerbated by the excessiveaccumulation of greenhouse gases in the earth’s atmosphere,particularly carbon dioxide, which trap massive heat energy from

Table 1China’s crude oil consumption and trade.

Source: Guy and Leung (2010, 2011).

Crude

consumption (Mt)

Net crude

imports (Mt)

Net import

dependency (%)

1990 114.9 �23.5 �20.5

1992 133.6 �7.3 �5.5

1994 149.5 5.2 3.5

1996 174.3 18.4 10.6

1998 198.2 34.1 17.2

2000 224.4 75.8 33.8

2002 247.9 81.3 32.8

2004 317.0 150.5 47.5

2005 325.3 142.8 43.9

2006 348.8 168.3 48.2

2007 366.5 184.8 50.4

2008 373.2 200.7 53.8

2009 408.3 218.4 53.5

the sun. The accumulation of these gases is linked to consumptionof fossil fuels, which release significant amounts of carbon dioxide.World energy demand is surging. Oil, coal and natural gas still meetmost global energy needs, and are creating serious implications forthe environment. One result is that CO2 emissions, the main causeof global climate change, are rising. The climate change does notonly refer to global warming, but to a broader set of consequencesuch as the deterioration of floods and droughts (that occurred inChina’s provinces in recent years), hurricanes (Katrina destroyedNew Orleans in 2005) and typhoons.

Coal use produces the largest amount of carbon dioxidecompared with oil and natural gas. Coal accounts for 70% inChina’s energy consumption mix. Thus China is becoming theworld’s largest producer of greenhouse gases. The huge consump-tion of coal by industry, plus the widespread use of solid coal andbiomass for heating and cooking in rural population, has gener-ated tremendous environmental pollution and health problems.CO2 emissions in China have risen rapidly (Dhakal, 2009; Routet al., 2011), as shown in Table 3.

Climate change has been recognized as an internationalsecurity threat, which is no longer relates only to quality of lifeand the environment, but also directly affects human and globalsecurity. Thus, energy consumption patterns and policies havealso become international security issues due to their link toclimate change. Resolving the issue of climate change needsinternational cooperation and an essential transformation ofenergy consumption patterns on a global scale (Li and Wang,2012). No country can isolate itself from the danger of climatechange. Consequently, there has been a shift in China’s energypolicy from the pre-occupation with securing supply to greaterefficiency and enable the transition to a low-carbon economy. Thetarget of a CO2 emission cut was determined by Chinese statecouncil in 27 Nov. 2009, which said that CO2 emission per unitGDP in 2020 will be 40–45% lower than that of 2005.

3.3. Renewable energy

The development of hydro, wind, biomass, solar, terrestrialheat, clean coal and nuclear power station in China has still a longway to go (see Table 4). China has published the national guide-line on a medium and long-term program for renewable energydevelopment, which states that the renewable energy account for15% of energy consumption by 2020, amounting to six hundredmillion tons of standard coal. This contributes to China’s diversi-fication of energy supplies and thus energy security, and can playan important role in reducing greenhouse gases emissions andprotect the environment (Anthony et al., 2011a).

The detailed goals for 2020 are as follow: hydropower capacitywill increase to 3 hundred million kilowatts from 1.17 hundredmillion kilowatts in 2008; wind power will generate 30 millionkilowatts (instead of 2.6 million kilowatts at present); biomasspower will provide 30 million kilowatts (increasing from 4.3 mil-lion kilowatts); the annual use of marsh gas annual use will

Table 3CO2 emissions in China.

Source: He et al. (2010)

1980 2000 2005

CO2 emission (MTC) 401 891 1424

CO2 intensity of GDP (kg C/dollar) 2.192 0.744 0.756

CO2 emission per capita (kg C/person) 405 703 1035

Table 4Installed capacity of renewable energy in China.

Source: Zhang et al. (2010), Jiang (2010)

Year Installed capacity Hydro Wind Solar PV Biomass

2005 GW 79.94 1.27 0.07 2

2008 GW 117 2.6 0.08 4.3

2010 GW 190 5 0.3 5.5

W. Cao, C. Bluth / Energy Policy 53 (2013) 381–388 385

increase from 1 billion cubic meters to 44 billion; solar energywill generate 1.8 million kilowatts (instead of 0.08 million kilo-watts at present).

The authority predicts that by 2050, the share of renewableenergy’s share will reach a level of 30% or higher. There is a bigdifference in the high-tech energy field between China andadvanced states. In the future world, who takes the lead inmastering the new energy technology, will win the initiative ofdevelopment (Fang, 2011).

3.4. Precautions against sudden fluctuations of supply

The first phase national base of a national oil reserve with totalcapacity of 16.4 million cubic meters, has been built in China, butit is very small compared with the contingency reserve of over100 days consumption in USA, Japan and EU etc. Natural gas, coaland uranium reserves are still unavailable now. China onlyconstructed six productive underground gas storage facilities ofdepleted oil–gas reservoirs, which amount to 2% of total gasconsumption, being lower 10–15% than average of advancedstates of gas industry.

China’s transportation of coal is reliant on a small number oftransport nodes. The Datong—Qinhuangdao railway, the Shuo-huang railway and the ‘‘Three Xi’’ railways account for over 70%of total coal transportation. The networks of coal railways andoil–gas pipelines are clearly inadequate. Coal railway trafficmakes up 48% of energy transport, while oil pipelines accountfor just 11.5%. The infrastructure development supplying thedeveloped areas in the eastern part of China needs to improve.

4. New thinking on the strategy of energy security of China

In the past China’s energy policy has been based on the twinprinciples of using domestic sources of energy as much aspossible and ensure sufficient supply to enable economic growth.This has given rise to distortions as it has promoted inefficientindustries, fostered a disregard for the environmental conse-quences of industrial and energy policy, and has impacted onChina’s international relations. Many of the advanced industrialcountries are not self-sufficient in energy and rely on the inter-national energy markets. Their mix of energy sources is quitedifferent from China’s—many countries have drastically reducedthe proportion of coal and rely more on oil, gas and renewableenergy. It is becoming increasingly clear that this model, whileaccounting for the initial success of China’s economic develop-ment, is becoming outdated as China’s dependence on energy

imports is growing. Six aspects of safeguarding China’s energysecurity can be strengthened: supply (development of multipleenergy sources), adjustment and command (energy saving prior-ity), emergency capability (contingency reserves), participation(international cooperation), influence (diplomaticy) and security(defence) [Yixin, 2011; Chen, 2009; Zhang, 2011; Sovacool et al.,2011; Qi, 2011; Li Qiang, 2009].

Multi-development means: A Develop coal in a safe, cleanand orderly way; B Steadily develop oil; C Speed up the devel-opment of natural gas especially LNG; D Deliberatively developnuclear power (bearing in mind the safety issues that came lightas a result of the Fukushima nuclear crisis in Japan) (Zhou andZhang, 2010); E Actively and orderly develop new energy andrenewable energy; F Improve the supply energy from domesticsources by all kinds of means.

It is very difficult to change China’s current energy structure ofsupply and demand, in which fossil energy still plays an irreplace-able role. China should shape its own energy security policy interms of resource conditions, technical standards and demandpotential, not going on the development path of high carbonindustrialization as happened in Western Europe. In the futuredecades of China, coal will continue to dominate the energy mix,but hydro, nuclear, wind energy and natural gas have a hugedevelopment potential (Swift-Hook, 2012). Despite the vestedinterests in the current energy policy, the Chinese government iscontemplating strategic shifts for the medium and longer term.One of the most important priorities will be a shift to gas to play amajor role in China’s energy industry. China’s first two LNGreceiving terminals have been put into operation in Guangdongand Fujian province, another one is being built in Shanghai, andmore are being planned. The construction of the first two LNGcarriers has been completed. To meet the increasing demand fornatural gas, China needs to build about 10 large LNG receivingterminals, and to import LNG at the level of more than 20 bcm(billion cubic meters) per year by 2020 (Lin et al., 2010). TheChinese government has decided to invest substantially in thedevelopment of solar energy, wind energy and ocean energy etc.The orderly development of coal-based alternative fuels andbiomass liquid fuels, faster development of unconventionalenergy including oil-shale, oil sand mining, coal bed gas andnatural gas hydrate etc, and leading the design of fossil fuelsubstitutes, are paths to enhancing the sustainable deliverabilityof energy (Li, 2010; Qiu et al., 2012).

China has abundant renewable energy resources. Its annualsolar energy ranges from 3360 MJ/m2 to 8400 MJ/m2, and twothirds of the land area’s solar radiation is more than 5020 MJ/m2.China’s wind energy resource is also substantial. The develop-ment potential of the on-shore wind resources is as much as253 GW at 10 m height with an annual electricity generation ofmore than 50 billion kW h. China’s hydro power potentialamounts to 400 GW, 128 GW of which is for small hydro powerplants with an installed capacity below 50 MW. China produces700 million tons of agricultural residues each year, and approxi-mately 350 million tons of them could be used for energypurposes, equivalent to 170 million tons of coal equivalent(TCE). The firewood production amounts to 220 million tons eachyear, equivalent to 130 million TCE. Further, solid wastes andwaste water discharged from livestock and poultry farms andlight industry could be used to produce 31 billion m3 of biogas,equivalent to 26 million TCE (Zhang, 2010).

Energy saving priority means: A Highlight the strategicposition of energy saving in the national development guidelines,economic development mode, energy production and consump-tion etc; B Perfect the energy saving mechanism; C Enhance theregulatory capacity of energy demand; D Control the dependenceon foreign energy reasonably.

Fig. 1. Six kinds of abilities of safeguarding China’s energy security under the new

situation.

W. Cao, C. Bluth / Energy Policy 53 (2013) 381–388386

At present, the unit product cost of high consumption industryis on average 40% higher than in other advanced countries. Theconservation index distribution of energy and consumptiondepends on local conditions, and reflects regional differences.The target of energy saving should link up with the ‘‘Twelfth Five-Year Plan’’. It should be a basis of macro-economic and macro-energy policy to promote the whole industrial structure adjust-ment, in reducing energy density is a guiding principle (Wanget al., 2008). To improve the energy statistical work, makingenergy information and statistical data timely, accurate, inte-grated and open will be useful. Likewise to adequately make useof the market mechanisms to realize the goal of saving energysaving and make use of price, revenue and financial policy topromote the conservation of energy and consumption. Concern-ing energy saving, from 1980 to 2002, China experienced a 5%average annual reduction in energy consumption per unit of grossdomestic product (GDP). While during 2002–2005, energy inten-sity increased 5% per year. China’s 11th Five Year Plan (FYP) set atarget of reducing energy intensity by 20% by 2010. It is importantto maintain and strengthen the existing energy saving policiesand programs that are successful while revising programs oradding new policy mechanisms to improve the programs that arenot on track to achieve the stated goals (Price et al., 2011).Currently, this is the basis of the government’s approach, but thisis not enough. Without redesigning industrial processes, changingtransport policy and improving the heat conservation of publicand private buildings energy intensity is likely to increase as theeconomy grows further.

Contingency reserves means: A Set up a two-grade energyreserve system of nation and enterprises; B Establish a soundtwo-grade energy security pre-warning mechanism of state andlocal government; C Improve the emergency response capabilitiesof natural disasters, infrastructure breakdown and demandfluctuations etc.

Crude oil and natural gas reserves are crucial elements ofnational energy security. A national strategic contingency reservesystem should be set up in order to enable the country to copewith any oil crisis arising from international events. Due to theincreasing dependence on foreign oil in the future and theincomplete market mechanisms, petroleum reserves are neces-sary to meet possible oil price fluctuations and ensure the stableand sustainable growth of economy. The first imperative actionshould be taken as follows: (1) Pass laws on strategic contingencyreserves; (2) Establish governmental and non-governmentalreserve mechanisms; (3) Construct a governmental oil reservecapability and regulate the obligations of non-governmental

reserves and enterprise reserves; (4) Design the gradual improvementof oil reserves. At the same time, this country may make marginal oilor gas fields of high exploitation costs as strategic resource reservesunderground, temporarily suspending exploitation.

These are the domestic measures to be taken to improveenergy security in China which are currently under consideration.The six aspects not only contact each other, but also restrict eachother (see Fig. 1).

5. Concluding remarks

China has been very successful in pursuing the exploitation ofdomestic energy resources and designing an energy infrastructurethat prioritizes the use of domestic energy resources whilesupplementing them with imports to support its rapid economicdevelopment. Unlike many other resource rich countries, Chinahas managed to avoid the ‘‘Dutch disease’’. But it is clear that thecurrent system will have to be modified substantially in order tomeet China’s needs in the future. This is gradually being under-stood in China, as a recent interview of the CNPC’s (China NationalPetroleum Corp.) general manager with Hong Kong’s Wen Wei Poon how the CNPC will do in the ‘‘Twelfth Five-Year Plan’’ as aNational Oil Company to safeguard national energy securityrevealed. ‘‘Construction of comprehensive international energycompany, mainly doing the development, the transformation, theharmonious three important matters, building a green, interna-tional and sustainable CNPC are our goal of the 12th Five-Yearperiod’’, Jiemin (2011) explained.

5.1. Enhance the technical level through competition

The CNPC views every one of the major decisions is subject tothe supremacy of national interests. The 12th Five-Year goal ofthe proposed construction of an integrated international energycompany is in line with China’s national conditions, but also toseek to adapt China’s policy to the trend of world economicdevelopment. Jiang pointed out that the current internationalenergy companies are mainly divided into two categories: One isthe upstream business, which is responsible for the project, andits technical services all employ professional companies to do; theother is the technology service company. But after years ofdevelopment, including Shell, Mobil, Iraq Petroleum Companyand other major international energy companies are now seekingto change and develop the upstream and technical servicebusinesses using an integrated approach.

Therefore, the CNPC needs to highlight the core businessessuch as oil and natural gas and develop engineering technologyservice industry at the same time, in order to enhance the abilityof safeguarding national energy security in the future. Jiang saidthat, ‘‘my position on the engineering services business is toensure the development of core business. From now on, morethan half of teams will go out to improve their own competitive-ness and technical level through the international competition,even if only 5% of the profits do no matter.’’

Jiang proposed that the CNPC should emphasize three keypoints over the next five years, and natural gas business devel-opment, as well as the construction of green CNPC was placed inthe first place. To the excellent international energy companies,natural gas and oil business has reached proportion of 1:1. Thedevelopment of natural gas in China falls behind foreign coun-tries. In 2004, the opening of the West–East natural gas pipelinemarked the era arrival of natural gas industry in China.

Natural gas is the cleanest fuel in the currently known sourcesof primary energy. To reduce China’s dependence on foreign oil, todevelop the natural gas business is the most realistic option.

W. Cao, C. Bluth / Energy Policy 53 (2013) 381–388 387

‘‘After ‘Eleven–Five’ efforts, the business proportion of natural gasof CNPC has already surpassed 30%. We will strive for five yearsagain to enable the proportion of natural gas to achieve 50%.’’

5.2. Seize the opportunity to play the six advantages

Oil and natural gas are the non-renewable resources, and theirstorage quantities of the earth are limited. How to deal with theexisting resource constraints and achieve sustainable develop-ment is the third important task of CNPC in the 12th Five-Yearperiod. Jiang admitted that, in terms of scale, the CNPC hasalready been at fifth place in the global oil company list ofintegrated rank. In front of the ‘‘lean gas and oil’’ resource reality,it is very difficult for China to surpass Saudi Arabia, Iran and othertop state oil companies.

In this case, Jiang suggested that, the domestic oil and gasresource development should avoid dispersion and focus on theselection of three regions to break through. First of all, China willcontinue to play an international top level of oil recoverytechnology in Daqing oil field, realizing sustained and stable yieldof 40 million tons of Daqing oilfield. Second, the oil gas output ofChangqing oilfield aims to achieve 50 million tons by 2015. TheChangqing oilfield will become the western Daqing. Third, the keypoint of energy development is Xinjiang, which seeks to achieve50 million tons of oil gas production.

Jiang pointed out that the 12th Five-Year period is CNPC’simportant five years for building a comprehensive internationalenergy company, is also the important strategic opportunity timewhich can develop CNPC’s ability to the full. But the development isstill faced with severe challenges, and the various risks anduncertainties increase. For this reason, we must ‘‘enhance strongpoints and avoid weaknesses and take advantage of six comparativeadvantages of the CNPC.’’ Specifically speaking, first, the nationaleconomy continues to develop quickly, and the domestic marketspace is broad. As the home largest oil gas production supplyenterprise, the CNPC places itself directly in China’s huge marketwith strong strength in the resource base, sales network, pipelinetransportation and storage facilities and so on, and has the ability tofurther develop and capture the market. Second, the oil gas corebusiness is prominent. At present, the oil gas reserves and reserve-production ratio owned by CNPC are higher than the internationallarger oil companies. Third, the business chain is relatively com-plete. The CNPC not only has oil/gas exploration and development,but also has oil refining and chemical industry, pipeline storage andtransportation, sales trading etc., which have formed the upstreamand downstream business development pattern of production andmarketing integration. The CNPC can rely on its own strength tooperate projects and is not subject to others, due to its benefit gainin each business chain and strong anti-risk ability. Fourth, the R&Dstrength of science and technology is very strong. The CNPC’sintensity of investment in science and technology achieved 1%during the 11th Five-Year, and was equal or higher than the level ofinternational larger oil companies. Fifth, the overall quality of talentteams is high. Sixth, we have the unique culture advantages.

5.3. Adjustment of the primary energy structure

As we have seen, China’s current energy structure (70% coal,20% oil and only 4% natural gas) is not appropriate for a moderneconomy. Even if the use of advanced coal desulphurizationtechnology, its emission of carbon dioxide is still higher than thatof oil (100%) and natural gas (300%). Although the development ofwind, solar, biomass and other new energy sources is movingahead, they cannot become the major source of energy for theChinese economy. For the next 30 years, fossil fuels such as coal,oil and gas will play a leading role in the primary energy for China

or the world. But China will seek to adapt its industry so thatnatural gas will become the principal source of primary energy.

It is evident that China’s policymakers have recognized theneed to transform its energy policy in order meet the require-ments of its rapidly growing economy for the 21st century. Inorder to become a leading global player in the industry that has tomeet the constraints of safeguarding the environment, limitingclimate change and navigate the complexities of an internationalorder where major oil-producing states are located in potentialconflict regions, significant adjustments are necessary. The factthat the government’s legitimacy is closed linked to continuedeconomic growth, and given the complex network of vestedinterests in the huge Chinese energy industry, the pressure tomaintain the focus on security of supply will remain. At the sametime China’s policy of investing in local energy industries acrossthe globe has made it a major player in international oil marketsand given China new diplomatic influence at a global level. So farChina has been reluctant to exercise its influence in a strategicsense or assume greater responsibility for global security. ForChina to achieve energy security and consolidate its position as amain player in the international energy business of the 21st centurymay have profound effects on China’s domestic politics and foreignpolicy that have not been anticipated by policymakers.

Acknowledgements

The author is extremely grateful to the University of Leeds, aswell as the 2009 Visiting Scholar Program of Fujian Province inChina, which supported the author (conferred the title of VisitingResearch Fellow) to research at the University of Leeds. This paperwas supported by the project of science and technology creationplatform of Fujian province ‘‘Research Center for Cleaning Com-bustion and Energy Utilization’’ (No.2009H2006). This work wasalso financially supported by the Huang Huizhen DisciplineConstruction Foundation of Jimei University (ZC2012015) andTechnology Project of Fujian Provincial Department of Education(JA12191).

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