Caspian Report - Issue: 08 - Fall 2014

gas, which increased by 18.3% and
reached 69.2 bcm in 2007, its import
dependence is expected to increase
rapidly due to rising gas demand.
Despite the rapid increase in consumption,
the share of natural gas in
China’s energy mix is still relatively
low at 3.5%, while coal accounts for
69.5%. Natural gas consumption per
capita amounted to a mere 53 cubic
meters in 2007, compared with the
world average of about 460 cubic
meters. In order to promote the use
of this “cleaner energy” as a substitute
fuel for oil and coal, the government
aimed to increase the share of
natural gas in China`s total primary
energy consumption (TPEC) up to
10% by 2020. 27 Although natural
gas production and use is rapidly increasing
in China, it only comprised
4% of the country’s total primary
energy consumption in 2011. Heavy
investments in upstream development
and greater import opportunities
are likely to underpin the significant
growth in China’s natural gas
sector. China contains several natural
gas-producing regions, including
the western and central parts of the
country as well as offshore basins.
While eager to develop older natural
gas fields, China’s oil companies are
exploring new areas such as deep
water, shale gas, and gas derived
from coal seams. The country’s first
deep water field is expected to come
online by 2014. China continues
to invest in natural gas pipeline infrastructure,
to link the production
areas in the western and northern
regions of the country with demand
centres along the coast, and to accommodate
greater imports from
Central Asia and Southeast Asia. 28
This rapidly increasing energy demand,
especially for liquid fuels, has
made China extremely influential in
world energy markets. 29 For China,
the implied price is crucially below
the Asian cost of importing liquefied
natural gas (LNG), an alternative
energy source it is developing. In
other words, there is China’s need
for a secure supply of gas. China
routinely talks about reviving the
Central Asia “Silk Road” trade corridor
that is a geographical broadside
to Russia, with its own ambitions to
act as a bridge between Asia and Europe.
Today, China has strengthened
its position in the gas market. It has
funded and built a pipeline system
to supply itself with gas from Turkmenistan
via Uzbekistan and Kazakhstan.
Indeed, China agreed on a
target to import 65 bcm per year of
Turkmen gas by 2016. China is said
to be unwilling to pay Russia more
than it pays to Turkmenistan. Secondly,
China knows that, thanks to
events in Ukraine, Russia’s position
in Europe is not as strong as it has
been. Thus China is progressively
gaining economic and political influence,
which will help it to sign strategic
partnership agreements with
all the countries of Central Asia. (See
Figure IV)
If China needs to make a choice
which option holds more advantages
At the macro-economic level,
China remains very much aware that
bilateral trade with the US is three
times greater than its trade flows
with Russia. Considering Washington’s
possible reactions, China is
still aiming to build and maintain
a major power relationship with
the US economy, which remains
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CASPIAN REPORT, FALL 2014
27.
Obuyuki Higash: “Natural Gas in China Market evolution and strategy”, International Energy Agency,
Working Paper Series, June 2009, http://www.iea.org/publications/freepublications/publication/nat_
gas_china.pdf.
28.
http://www.eia.gov/countries/country-data.cfmfips=ch
29.
“China”, http://www.eia.gov/countries/cab.cfmfips=ch