A
s the world’s most‑populous country, China is also the world’s largest
producer and consumer of energy. It has the world’s second‑largest
economy and one of the fastest‑growing economies, with the
International Monetary Fund (IMF) expecting China’s gross domestic product
to surpass that of the United States, in purchasing power parity terms, by the
end of this decade.
1
Rapidly increasing demand for oil and natural gas, both in
the recent past and more critically in the future, has made and will keep China a
key player in global oil and gas markets.
The oil and gas industry in China, as well as China’s oil and gas activity
outside the country, should be viewed in the context of the broader policy
objectives of the new Chinese government. Under President Xi Jinping, China
is embarking on a process of broad economic reform, creating a more balanced
and sustainable platform for economic growth – one characterised by greater
domestic consumption as opposed to export‑led investments. As President Xi
noted in a recent speech on the energy sector, China is looking toward more
environmentally sustainable growth, implying a reduced share for coal in the
country’s energy mix and a greater role for natural gas and renewable energy. It
is also moving toward more market‑based pricing for energy commodities, as
well as encouraging energy efficiency and competition among firms.
2
Most critically however, in the energy sector, is China’s focus on
energy supply security, with that focus having both an external and an
internal component. Externally, to secure access to oil and natural gas,
China has aggressively expanded its direct acquisition of oil and gas
assets, as well as making substantial long‑term investments in overseas
assets/projects in order to secure long‑term future supply and/or gain
N Foster Mellen
and K C Yau,
EY Global Oil & Gas Center,
take a look at what China
is doing to meet its
ever-growing demand
for energy.
12 |
