X-Industry

China’s need for energy has skyrocketed over the last 20 years as the country has gotten richer and the middle class—now 400 million—has grown into a significant segment of the population.  Energy demands are not being met by domestic production, so China is now a net importer of oil, natural gas, and coal.

China’s energy source mix has traditionally been dominated by coal, but the share of energy produced by coal is dropping.  China is highly dependent on imported oil, which makes up about 68 percent of their oil consumption.  Most comes from Middle East nations, but Russia has recently become China’s biggest supplier, and the US is now exporting oil to China as well.  Gas makes a small contribution to China’s energy needs, but here too China has started importing from Turkmenistan and Russia.

As long as China’s economy continues to grow (GDP growth is now at 6.6 percent) and the middle class gets larger, energy demand will grow in proportion. China is expected to increase its demand for energy by at least 34 percent by 2040.  Coal’s contribution to the energy mix will likely decrease to about 40 percent by 2040, but oil demand will grow and import dependency could reach 80 percent by 2040.  The Chinese government is promoting a shift from coal to gas, but the lack of a significant shale gas industry in China means gas imports will increase as well.  Energy from renewable sources such as solar and from nuclear power are expected to increase, but not enough to offset increased demand for oil and gas.

The continued dependence on imported oil and gas in the future will likely drive concerns about energy security.  As long as China remains dependent on Middle East oil, securing access via Indian Ocean maritime routes, through the Malacca Strait, and onward through the South China Sea will be a national security priority.  This is likely motivating China to develop greater naval power projection capabilities to secure these routes, and naval operations in the Indian Ocean have already started.

Link to entire report: IR-19-092-001_China Needs Oil_FINAL.pdf

You need to be a member of Red Sky Alliance to add comments!

Join Red Sky Alliance