China’s Energy Consumption

Econ 286

Spring 2000

Josh Counts and Rhys James

China’s Energy

• From 1979 to 1997 China's average annual GDP growth rate came to 9.8 percent

• immense size and population strains resources

• distribution not production is the problem

Total Energy Consumption

Total Energy Production

China’s Robust Growth in Energy Demand

Energy Intensity

• Becoming increasingly energy efficient

• Energy Intensity(consumption per unit of GDP) down by half over last 20 years

• still 3 to 10 times that of major industrial economies

• predicted to decline to 60% of current levels in next 25 years

Future Growth of Total Energy Consumption

• Decline in Energy Intensity leads to 4.5% average annual growth in next 25 years

• triples Total Energy Consumption over that time span

Current Energy Breakdown

• Coal is #1 but decreasing

• still not enough alternative sources to come close to ending dominance

• only sizable and affordable alternatives are Oil and Natural Gas

• all others including Nuclear and Hydroelectric are currently too expensive

Proportion of Different Energy Types

Statistics of Current Energy Breakdown

• 1987 1988 1989 1990 1991 1992 1993 19941995 1996 1997

• Production (millions of

• tons of coal equivalent 912.7 958 1016.4 1039.2 1048.4 1072.6 1110.6 1187.31290.3 1326.2 1319.9

•

• Percentage of Total

• coal 72.6 73.1 74.1 74.2 74.1 74.3 74 74.675.3 75.2 74.3

• crude oil 21 20.4 19.3 19 19.2 18.9 18.7 17.616.6 17 17.4

• Natural Gas 2 2 2 2 2 2 2 1.91.9 2.3

• Hydro Power 4.4 4.5 4.6 4.8 4.7 4.8 5.3 5.96.2 5.8 6

•

• Consumption 866.3 930 969.3 987 1037.8 1091.7 1159.9 1227.41311.8 1389.5 1420

•

• Percentage of Total

• Coal 76.2 76.2 76 76.2 76.1 75.7 74.7 7574.6 74.6 73.5

• Crude Oil 17 17 17.2 16.6 17.1 17.5 18.2 17.417.5 18 18.6

• Natural Gas 2.1 2.1 2 2.1 2 1.9 1.9 1.91.8 1.8 2.2

• Hydro Power 4.7 4.7 4.9 5.1 4.8 4.9 5.2 5.76.1 5.5 5.7

•

• GDP(billion of yuan,

• constant 1990 price 1542.2 1716.5 1786.9 1854.8 2025.4 2313 2625.3 2956.13266.5 3580.1 3895.1

• Energy Consumption

• (million ton per billion

• yuan) 0.56 0.54 0.54 0.53 0.51 0.47 0.44 0.420.4 0.39 0.36

Future Breakdown of Energy

• Coal will still rule

• will decrease from 72.2% of production in 1998 to 67.6% in 2025

• increasing levels of Hydroelectric, oil, and Natural Gas cause slight decrease in proportion of coal

Future Energy Production

Energy Breakdown 1998 vs. 2025

Energy Production Growth

***Note the units for coal and oil are different. Therefore much more coal is produced than oil.

Coal

• China is the earliest country in the world to discover, use and mine coal.

• Establishment of the new China liberalized productivity of the sector to a great extent.

• During the period from 1949 to 1957 when the First Five-Year Plan was finished, the annual output of coal rapidly increased to 130.5 million tons from 30.98 million tons, making China the fifth largest coal producing country in the world from the 10th in the past

• As of 1995 China was the world’s largest consumer of coal, consuming one out of every 3 tons of coal worldwide

Coal

• It is expected that by 2000 the total output of coal in China will reach 1.45 billion tons, retaining China's first position in coal production in the world.

• Mechanization will come to 80 percent of the sector, and 100 more mining pits of high yield and high efficiency will be constructed.

Trends in Coal

In % of total

Low-end estimate High-end Estimate

Projected Costs of Alternative Energy Sources in 2020

Future of Coal

• Due to its relative low price compared to other energy sources and natural abundance Coal will remain the leading source of energy in China for many years to come

• Hydroelectric power and nuclear power will not significantly replace coal any time soon

Oil

• Second-largest component of China’s Energy Consumption and Production

• 1957 60% imported• 1960’s and 1970’s oil “boom” 25% annual

growth and energy autonomy• began exporting oil peaking at 6.21 million

tons in 1985• by 1993 China once again a net oil importer

Reasons for Decline

• Obsolete technology and lack of technical expertise

• severe under-investment until early eighties

• First discovered fields such as Daqing(main oil field) matured

Plans for New Development

• Tarim Basin Fields with estimates of up to 10 billion tons of reserves

• these are very optimistic

• However Daqing Fields may be almost exhausted

• Hurts their production as old fields are very close to industrial centers while new fields require much more transportation

Trends In Petroleum

In % of Total

Energy Imports and Exports

Note: Scale in millions of US dollars

What Does This Mean?

• Coal is plentiful in China so there is no need to import it

• There is an increase in the aggregate demand for petroleum

• This has caused a dramatic increase in petroleum imports

• This could significantly affect world oil prices

World Oil Prices

China’s Effect on World Prices

• The increase in aggregate demand could cause a two to three percent increase in world oil prices

• China is not yet a major factor in these prices

• Future dependence on Oil could change that

Conclusions

• Coal is and will remain the number one energy source in China in the foreseeable future

• Petroleum imports will increase as consumption increases and national production stagnates causing possible effects on world oil prices