China Places Continuing Bets on Fossil Fuel Development
Two recent reports from China suggest that at least some decision-makers in the world’s new clean energy superpower are betting on a continuing market for fossil fuels—even if world oil prices fall below US$30 per barrel.
A state-funded study led by Beijing’s China University of Petroleum sees the country hitting peak oil production as early as next year, and peak commercially recoverable coal around 2020. “World oil markets and geopolitics are likely to be greatly affected as China seeks to meet the widening demand shortfall through trade,” CleanTechnica reports.
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That finding, in turn, may dovetail with a more than 12,000-word post by CEFC China Energy Founder and Chairman Ye Jianming, who foresees enough continuing oil demand to justify his company’s acquiring a $9-billion stake in Rosneft, the Russian oil giant, last month: Even if oil prices fall dramatically as the fuel is replaced by clean energy, Bloomberg reports, Ye still sees continuing demand for petrochemical feedstocks.
“Won’t the acquisition of these oil and gas resources become a burden? Of course not,” Ye wrote. “Chemical products have been scarce, and oil is the raw material that’s used for chemical processing.”
Citing Ye, the Bloomberg post traces CEFC’s recent business deals, taking advantage of low oil prices and economic sanctions against Russia to grab “a relatively cheap share in Rosneft and contribute to the long-term supply security of China, the world’s biggest energy user.” The company currently holds 80 million tonnes—about 560 million barrels—of foreign crude, and is also looking to natural gas as an environmentally friendlier fuel.
Much of CEFC’s activity supports the Belt and Road initiative, a major investment and construction effort by Chinese President Xi Jinping along a trade route between China, Asia, and Europe.
Alongside its observations about Chinese oil and coal supplies, the China University of Petroleum study sees water as the factor that could limit the country’s natural gas production, which would otherwise peak around 2040. “The country’s shale oil and gas areas are already ‘highly exposed’ to water stress issues, which are expected to increase over the coming decades,” CleanTechnica notes.
Overall, the study warns that if “new abundant energy resources” aren’t put in place, the resulting shortfall will “challenge the sustainable development of Chinese society.”
CleanTechnica also cites a secondary analysis that played out the options available to China. “There are various scenarios that follow from here. China could: shift to reducing its massive demand for energy, a tall order in itself given population growth projections and rising consumption; accelerate a renewable energy transition; or militarize the South China Sea for more deepwater oil and gas,” writes investigative journalist Nafeez Ahmed.
“Right now, China appears to be incoherently pursuing all three strategies, with varying rates of success. But one thing is clear—China’s decisions on how it addresses its coming post-peak future will impact regional and global political and energy security for the foreseeable future.”
CleanTechnica notes that China’s current target of 20% renewables by 2030 won’t be enough to fill the country’s fossil fuel gap, and its transition to electric vehicles will have to be sped up.