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Special Bulletin
A Japanese Perspective on the International Energy Landscape (221)

May 29, 2015

Pacific Energy Summit in Beijing
Ken Koyama, PhD
Chief Economist, Managing Director
The Institute of Energy Economics, JapanOn May 27-29, the sixth Pacific Energy Summit took place in Beijing, hosted jointly by theU.S. National Bureau of Asian Research (NBR) and the China Energy Research Society (CERS).
The annual meeting has been held in Asia-Pacific countries since the first one in Tokyo in 2009.
About 180 government officials, experts and industry representatives from China and otherAsia-Pacific countries and international organizations participated in the conference on a registrationbasis. These participants conducted active discussions at the Davos-style panel discussions andothers.
As the conference took place in China that boasts a dominant presence in the world energy
market, key topics there included China's energy market and policy and their implications. Due to its
sustained double-digit economic growth since the 2000s, China has substantially expanded energy
demand and replaced the United States as the world's largest energy consumer, with its global energy
market share standing at 22% in 2013. As the demand expansion centered on fossil fuels including
coal and outpaced the supply expansion, China has become a net importer of primary energy
resources.
China’s net import dependence for the whole of primary energy supply in 2013 stood at 15%.
But dependence on imports varies between energy sources. Particularly, China depends on imports
for 60% of domestic oil demand. The dependence is the highest among energy sources. China
depends on the Middle East for some 50% of its total oil imports, while the region has beendestabilizing. There is a sea lane security problem in regard to oil imports from the Middle East.
Given these points, oil supply security is the biggest energy security challenge for China. China’s
dependence on imports for natural gas supply has also risen to around 30% due to recent demand
growth, indicating an emerging supply security problem for natural gas. Under the situation, interests
are globally growing in how China would implement various energy security measures including thediversification of energy sources and energy import sources, overseas energy resources development
and the expansion of oil stockpiling.
At the same time, massive fossil fuel consumption including coal combustion has madeChina’s environmental deterioration very serious. The environmental deterioration has developed
into not only a key domestic policy problem but also a regional or global problem. China was theworld’s largest CO2 emitter in 2013, accounting for 27% of global CO2 emissions. Ahead of the 21st
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what measures China would take to hold down or reduce CO2 or greenhouse gas emissions has
become the world’s greatest attraction-attracting topic regarding climate change. Serious air
pollution symbolized by the PM (particulate matter) 2.5 problem has also become an urgent problem
for the Chinese government. China is now urgently required to accelerate the diffusion of non-fossil
energy (including renewable and nuclear energy) and the promotion of cleaner fossil fuel use(including the utilization of clean coal technologies, improvement of auto fuel quality specifications
and expansion of natural gas consumption). The Pacific Energy Summit in Beijing included multiple
sessions where this problem was discussed, leading me to recognize growing interests in theproblem.
As well as the abovementioned problems, new and important changes or trends in China
became interesting topics at the Summit. An important point in this regard is that China has shiftedto the “new normal” situation for an economic growth target of 7% in 2015 after the end of
double-digit growth. In order to maintain sustainable economic growth based on new economic
realities while promoting energy security and environmental measures, China is now required toimplement an energy transition to simultaneously attain the three E’s -- economic efficiency, energy
security and environmental protection. The discussions on these topics indicated a desired goal of along term transition of China’s energy future, some of which is reflected in the official goals in the
China’s 13th Five-Year Plan energy policy targets including coal’s share of energy consumption at
62% or less and a non-fossil energy share of 15% for 2020.
Another interesting point for me was that Pacific Energy Summit participants made various
arguments on Chinese energy market and policy trends’ implications on the international energy
market. First, arguments on gas supply relations between China and Russia attracted global
attentions, where two countries have strategically deepened relations in view of the internationalsituation after the Ukraine crisis. China’s policies on Russia as well as on the Middle East under its
energy strategy are the key to analyzing the future international energy situation. The fate ofChina-Russia gas supply relations will influence not only the two countries’ and Eurasian geopolitics
but also the supply-demand balance and negotiations between gas sellers and buyers in the Europeangas market and the Asian liquefied natural gas market. While placing great hopes on China-Russia
gas supply relations, Pacific Energy Summit participants interestingly pointed out that uncertainties
exist with regard to actual infrastructure development and that progress in the relations has notnecessarily been fast.
Second, the impacts of downside risks emerging in China on the international energy market
were also a matter of interest at the conference.

This is because the concerns were growing on aneconomic downside risks in China while there is a widely shared view that China’s economic growth
will drive global energy demand in the long run. On this point, I introduced the IEEJ’s analysis on
the negative impacts on the Middle East in the oil market and on former Soviet republics in the gas
market as indicated in our “Asia/World Energy Outlook 2014,” which attracted high interests fromother participants.

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Third, Pacific Energy Summit participants indicated various interests in the future course ofChina’s “One Road, One Belt” policy and the roles and influences of the planned AsianInfrastructure Investment Bank as a major tool for implementing the policy. China and otheremerging countries in Asia are still continuing economic growth accompanied by energy demand
expansion, although the growth is decelerating. The scale of energy infrastructure investment to meetthe growing energy demand is very great. If the scope of infrastructure investment is expanded tocover Asian developing countries and others for the “One Road, One Belt” policy, energy and otherinfrastructure investment may require huge amount of capital. How China will tackle suchinvestment requirement under its international energy strategy has become a great matter of interest
to the world. This is because the China’s strategy will have great implications on not only energy
problems but also international relations including China’s challenge to the international order which
was built under the U.S. leadership. We will have to closely watch how China’s energy transition
would develop and what international influences China’s policies and strategies would exert amid
the development.

Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/special_bulletin.html

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