China Needs to Cut Dependence on Foreign Oil and Gas

China urgently needs an energy transformation, says Li Wei, head of the Development Research Center (DRC) of the State Council, according to People’s Daily and China Daily. He says China must transform itself into a country of "security, greenery and efficiency" by 2030, or face with erratic supplies and unsurmountable environmental challenges.

Li's comments are based on a two year research program led by the DRC and supported by over 70 experts from Royal Dutch Shell, Harvard University and Tsinghua University, among others.

Growth of China's energy demand is expected to slow in line with economic activity, but a dependency on foreign oil and gas means that by 2030, as much as 75 per cent of China's oil might be imported. Natural gas demand will also rise rapidly bringing grave energy security concerns, Li warned.

By 2030, China and India are expected to account for half of the world's oil consumption. In contrast, the US is expected to be the center for world oil production by 2020, and the country aims to become the leader in deciding oil and gas prices, says Li. Volatile geopolitics could accentuate supply risks.

Even though the US has made breakthroughs in energy independence, it is unlikely to soften its grip on oil resources in the Middle East. Rising risk for the energy transportation routes will pose new challenges which will be directly affected by geopolitical risks in the neighboring regions, the Middle East and Africa, Li said.

Li also warned of the environmental challenge of increasing fossil fuel consumption. China's oil consumption will keep rising and reach 6 billion tonnes by 2020 and 8 billion tonnes by 2030 if it goes unchecked, putting pressure on the environment.

Li wants a secure, green and efficient system of energy production and consumption, one that sees China setting clear strategic goals to limit dependency on foreign oil and natural gas.