IEEJ：November 2017○ｃIEEJ 2017
Special Bulletin
A Japanese Perspective on the International Energy Landscape (349)November 9, 201711th China-Japan Joint Symposium on Oil & Gas
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn November 8, the 11th China-Japan Joint Symposium on Oil & Gas took place in Beijing.
China’s CNPC Economics and Technology Research Institute and the Institute of Energy Economics,
Japan, have cosponsored the annual symposium alternately in Beijing and Tokyo. The two institutes
have presented reports on the most important or hottest energy market challenges in their respective
countries and the relevant international situation at the time, followed by panel discussions. At thelatest symposium, the Chinese and Japanese sides presented one report each at two sessions on“World Energy & Trends of Oil and Gas” and “Opportunities and Challenges for Oil & Gas Industry”
before panel discussions. A total of 110 people, including representatives from Japanese companies,
participated in the symposium on a registration basis, conducting active discussions.
In the first session, IEEJ Director Yukari Yamashita outlined our IEEJ Outlook 2018 (see AJapanese Perspective on the International Energy Landscape (345) for details) and introduced ananalysis on “peak oil demand.” In the second session, I reported on the international oil market,
including recent crude oil price hikes, and the present status of and future prospects for the LNG
market. Significantly, Chinese participants made numerous questions and comments on the two IEEJ
reports, leading to active discussions. However, the Chinese side’s reports at the symposium werevery interesting to me. In the following, I would like to summarize the Chinese reports.
The first Chinese report was made by Dai Jiaquan, director of oil research at the CNPC ETRI,
discussing “the Development of China New-Energy Vehicles and Its Impact.” In a manner torespond to the Yamashita report in the first session, the Chinese report analyzed how the diffusion ofnew-energy vehicles in the vehicle market would impact the Chinese oil market, particularly oildemand. The IEEJ analysis on “peak oil demand” covers the global oil market while considering
rapidly spreading global moves to regulate sales of internal combustion engine vehicles and theautomobile industry’s initiatives to diffuse advanced vehicles including electric, fuel cell and plug-inhybrid vehicles. Given China as the largest vehicle market in the world and its initiatives tostrategically and aggressively diffuse next-generation clean vehicles under its industrial andenvironmental policies, however, I have paid much attention to China as the most important country
in this regard.
China has designated electric, plug-in hybrid, fuel cell and other vehicles as new-energy
vehicles, or NEVs, and taken proactive support measures for their diffusion from the viewpoints ofenvironmental policies for urban air pollution and climate change countermeasures and industrial
policies for the Chinese automobile industry to lead the world in next-generation vehicles. In1

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September 2017, the Chinese government announced regulations to boost NEVs’ share of newvehicle sales to 10% in 2019 and to 12% in 2020 and decided on the introduction of NEV-related
credit trading and other systems. Based on these actions, the Chinese report analyzed NEV
technology development and relevant cost cuts and pointed out that there are numerous cost andinfrastructure challenges for the rapid diffusion of NEVs. It also assumed that the number of NEVs
would increase to 5 million units (accounting for 2.3% of total Chinese vehicle ownership) in 2020
and to 30 million units (7.5%) in 2030 and that these vehicles could work to reduce oil consumption
by about 25 million tons (or petroleum product consumption by 7%) in 2030.
In this way, the future diffusion of NEVs could hold down China’s oil consumption and cap arise in its dependence on oil imports, bringing about some benefits, the report said. As far as thepower mix remains unchanged from the present one, however, NEVs may not necessarily produce
environmentally friendly results as indicated by the lifecycle analysis of pollutant emissions
including CO2, PM2.5, sulfur oxides and nitrogen oxides, it said. The Chinese report thus indicatedthat how the power mix changes should be promoted toward more environmentally-friendly way
would be important particularly for China regarding the diffusion of electric vehicles. It also notedthat it would be more important to have a comprehensive view covering not only the NEV
introduction but also overall fuel efficiency improvement, automatic driving and othernext-generation vehicle technologies, and sharing and other vehicle utilization styles in considering
China’s future oil demand. Given such comprehensive or extensive viewpoint, the Chinese reportconcluded that China’s oil demand could peak around 2030. This conclusion is interesting.
Another Chinese report was made by Duan Zhaofang, a senior natural gas market researcher
at the CNPC ETRI, which was titled “China Natural Gas Market Status and Outlook.” The mostimpressive point in the report was that natural gas demand in China is resuming rapid expansion
after a temporary growth deceleration. Factors behind the natural gas demand recovery include an
economic growth recovery, business environment improvements for energy-intensive industries,enhanced air pollution countermeasures and LNG import price drops through crude oil price plunges
and global LNG oversupply, according to the report. China’s natural gas consumption in the firstnine months of 2017 increased by 17% from a year earlier. In line with the demand expansion,
domestic gas production grew by 11% and imports posted an even steeper expansion of 21%.
Particularly, LNG imports increased by 35% to 33.3 billion cubic meters, surpassing 31.5 Bcm inpipeline gas imports.
The Asian and global LNG market is still amid oversupply. A mainstream view among LNG
market participants is that while LNG demand will continue to expand mainly in Asia, oversupply
will remain until around 2023 as LNG projects subject to past investment decisions mainly inAustralia and the United States continuously start production. However, China may sharply expand
gas demand by switching from coal to gas, promoting a gas market reform and developing relevant
infrastructure including pipelines and LNG terminals. Depending on shale and other domestic gas
resources development, China’s gas demand could expand even more than expected. The Chinese
report forecast that China’s LNG imports would expand rapidly from 27 Bcm in 2015 to 60 Bcm in2020 before growing more slowly to 70 Bcm in 2030 due to assumed domestic shale gas
development and increasing pipeline gas imports. It is very difficult to accurately project the future
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course. Future LNG demand and imports in China (and other Asian emerging countries including
India and Southeast Asian nations) will greatly impact the global LNG market. We will have toclosely watch future developments.

Contact: report@tky.ieej.or.jp
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