How to achieve energy security in China

Ka-ho Yu's picture
Ka-ho Yu, Research Fellow, Center for International Energy Security Studies, Chinese Academy of Social Science
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In this interview with Gastech News, Mr. Yu Ka-ho, a specialist in Chinese energy security, international relations and global governance, discusses the changing face of China's energy market and how the country can achieve energy security.

Gastech News: How has China’s energy policy evolved over the years? And, what is its impact on the country’s gas market today?

Ka-ho Yu: Quadrupling the use of gas is a necessary transitional step for China to reduce its reliance on "dirty" coal before it can move towards zero-emission sources. China now needs to find a way to free itself from coal's chokehold, and gas is a cleaner alternative. Due to the need of both energy security and environmental protection, China’s appetite of imported gas is growing. Chinese government’s intensified efforts in anti-smog moves by adjusting the energy industrial structure and energy consumption structure will increase China’s gas demand. The entering of Russian gas into the Chinese market is conducive for China to improve the structure of its primary energy consumption but this depends on the progress of China’s oil and gas market reform.

Gastech News: China is set to become one of the biggest energy demand centres, what are the drivers to achieve security of supply?

Ka-ho Yu: China security of energy supply could be reflected in the following four aspects: diversification of source and route, industry integration, financial system, multilateral governance. China would promote cooperation in the connectivity of energy infrastructure, such as pipelines, and create an integrated industrial chain of energy and resource cooperation. It would also pay attention to the development of energy financial products, including spot and future oil and gas, financial product contracts, green finance and energy price benchmark. Meanwhile, since regional energy rich regions are important to China’s energy supply, its external energy cooperation will stride forward from bilateral to multilateral, interconnecting the producing, consuming and transit countries.

Gastech News: What are the latest developments on China and Russia’s energy relationship?

Ka-ho Yu: In 2014-2015, Russia and China signed two major gas deals when the leadership visited each other - Power of Siberia contract 2014 and Altai agreement 2015. This is the key milestone in Sino-Russian energy cooperation and is also a key part in China’s “Belt and Road Initiative”. In the long run, these agreements would dramatically change the gas market landscape in China and Asia and threaten future LNG projects around the world.

Gastech News: Talking about shale gas in China – Will China emulate the U.S.’ shale bonanza in the near future?

Ka-ho Yu: It is difficult for China to emulate the US’s shale bonanza after comparing the following five aspects of the two countries: geological condition, land and resource access, market incentive and structure, policy regulation and technology. [Interview ends].

Considering the global gas arena, what lessons - or other countries' experiences - may be relevant for China's energy security? Let us know your comments below.

"What impacts could the existing - and a new - Russia-China pipeline deal have in Asian (especially Chinese) LNG & gas prices?" To discuss about this with leading gas experts, attend Gastech Singapore 27-30 October 2015. To view the conference programme, click here.

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