Caspian Report - Issue: 08 - Fall 2014

MESUT HAKKI CASIN
98
economic development model. But
the country’s poor air quality and
the “war on pollution” declared by
Premier Li Keqiang in March are
likely to increase the desirability
of Russian natural gas. Indeed, the
HEAVY INVESTMENTS IN UPSTREAM DEVELOPMENT
AND GREATER IMPORT OPPORTUNITIES ARE LIKELY
TO UNDERPIN THE SIGNIFICANT GROWTH IN
CHINA’S NATURAL GAS SECTOR.
Chinese government’s announcement
in April that the country aims
to increase more than double of the
country’s natural gas consumption
from 170 bcm in 2013 to 400-420
bcm in 2020 means China now needs
Russian gas more than ever. 25 China,
home to 1.3 billion inhabitants with
44,000 births every day, passed Japan
in the second quarter of 2010 to
become the world’s second-largest
economy. Obviously, China is making
progress towards the realisation
of the “Chinese dream”, a great national
rebirth. China is the world’s
most populous country with a fastgrowing
economy that has made it
the world’s largest energy consumer
and producer. China became a net
importer of oil in 1993 when 7.5%
of its oil consumption had to be imported.
In 2009, China’s oil demand
reached 408.3 million tons (Mt) and
import dependency of oil – i.e. the
percentage of net imports over total
demand - reached 53.5% (See Figure
III). First of all, natural gas plays
a relatively minor role in the Chinese
energy economy, as indicated by its
small share in the fuel mix. Secondly,
and more importantly, Beijing has
recently successfully landed some
long-term contracts, which will fill
the supply–demand gap in the near
future. It is estimated that China
will need to import 40–80 bcm each
year by 2020, and China has already
procured a total of 30.6 bcm of LNG
supply based on long-term contracts
and over 30 bcm of pipeline gas from
Turkmenistan. 26
In 2007, China’s natural gas consumption
increased by 23.8%, reaching
69.5 bcm (NBS 2008). Thanks to
this rapid increase, China became
one of the world’s top 10 countries
in terms of natural gas consumption.
Although China has accelerated
the domestic production of natural
Figure III: China’s energy consumption
25.
Erica Downs: “In China-Russia gas deal, why China wins more”, Fortune 20 June 2014, http://fortune.
com/author/erica-downs/.
26.
“Guy C.K. Leung: “China’s energy security: Perception and reality”, Energy Policy, 2011, Vol. 39,
p.1330-1337.