IHS World Markets Energy Perspective | |
Significance | The plan to build energy bases during the 12th Five-Year Development Plan is designed to support national energy supply availability, and the economic development of less prosperous inland areas of China, in line with the government's aim to reduce socio-economic disparities in the country. |
Implications | The formation of energy bases in remote areas of China will necessitate large-scale construction of energy-transmission infrastructure, including railways for coal transportation, gas pipelines, and long-distance electricity transmission lines. |
Outlook | National Development and Reform Commission estimations in the 12th Five-Year Plan suggest coal will remain the primary contributor to total energy consumption, although non-fossil fuel resources are due to become increasingly important in the consumption mix, rising to 11% of China's energy needs by 2015. |
Energy Bases
China's government has announced that during the 12th Five-Year Development Plan period (2011–15), five major energy bases will be constructed throughout the country. Media reports suggest the five energy bases will be in Shanxi province, the Ordos basin, eastern Inner Mongolia, Xinjiang autonomous region, and south-western China, and are designed to support national energy supply availability as well as the economic development of less prosperous inland areas.
Shanxi province—the largest coal-producing province in China—is a natural choice for a national energy base, given the coal dependent nature of China's energy-consumption mix. The 12th Five-Year Plan submitted by Shanxi advocates consolidation of the provincial coal industry to enhance productivity and regulatory oversight, as well as production efficiency, in line with national government objectives. This consolidation effort has already resulted in the closure of hundreds of small mines and this effort will continue—with previous reports suggesting the province is aiming to bring down the number of coal mines to 800 by 2015. To improve energy efficiency, Shanxi and other provinces will continue to use new technologies to upgrade coal-fired power plants. Shanxi seeks to diversify its energy resource base through to 2015 by promotion of alternatives to conventional coal production, such as coalbed methane (CBM), coal liquefaction, coal gasification and natural gas exploitation. Intensive coal mining activities in Shanxi have led to environmental degradation and resource exhaustion, which has prompted the provincial authorities to look at new ways of developing their domestic resources. Under the 12th Five-Year Plan, Shanxi's coal-to-liquid output is set to hit 15 million t/y, its coal-to-olefin output will hit 10 million t/y, and its oil and gas output is set to rise to 60 million t/y. Furthermore, development of coal-liquefaction techniques can improve domestic fuel supply availability—important in the context of the plateau in domestic crude production—and support a key pillar of the 12th Five-Year Plan, namely accelerating the development of advanced energy technologies based on current needs.
Inner Mongolia is set to be another key coal-producing region, with the government planning to increase output to hit 1.2 billion tonnes by 2015, and as in Shanxi, the government is looking to develop coal-conversion capacity in this region. Under the 12th Five-Year Plan, the National Development and Reform Commission (NDRC) expects coal consumption to drop from 70% to 63% of total energy consumption, although in real terms consumption is expected to increase from 3.3 billion tonnes to 3.7 billion tonnes. The government is looking towards other energy bases in Xinjiang, the Ordos basin, and areas of south-western China to meet a projected gas consumption level of 260 bcm/y by 2015, a staggering projected increase on the 91.7 bcm/y of gas consumed in 2009, according to the BP Statistical Review. With large reserves discovered in the Changqing oil and gas province and the south-west gas province, and tantalizing shale gas prospects, production will undoubtedly continue its rapid increase, although meeting this target will also be dependent on rapid increases in imported gas supplies both via newly built transmission infrastructure from Central Asia and LNG liquefaction facilities.
For crude oil, the aim is more modest—to stabilise domestic production over the next five years—in view of difficulties in increasing year-on-year proven reserve levels, although some crude output growth is expected from fields like Karamay and Tahe in Xinjiang, which can support expansion of refining and petrochemical facilities in north-west China (see China: 30 January 2009: China's CNPC and Sinopec Vow to Ramp Up Xinjiang Crude Output). The government's stated aim of promoting efficiencies in exploration will probably mean a wider application of horizontal drilling and development of shale oil reserves to boost domestic production levels.
Outlook and Implications
A key plank of China's 12th Five-Year Plan is increasing non-fossil fuels in the energy mix, both to preserve finite non-renewable energy resources and to reduce the amount of carbon dioxide emitted per unit of GDP. Development of domestic hydropower capacity will play a key role in meeting China's national carbon-intensity targets over the next decade, with installed hydropower capacity due to hit 250 million kilowatts by 2015, according to Jiang Bing of the NDRC, while nuclear power capacity is set to rise to 39 million kilowatts. Overall, the National Energy Administration (NEA) estimates that non-fossil fuel capacity will make up 11% of China's energy needs by 2015. China is looking to the south-west region to reach the new hydropower capacity target, while new research and development centres for wind and solar energy are due to be established in Inner Mongolia, a region already named as one of China's wind power bases.
The development of energy bases is aimed at improving production efficiencies through clustering facilities, which can then share resources, while their location in relatively remote locations will necessitate significant investments in energy infrastructure, from coal railway transportation routes, to transnational gas pipelines and long-range electricity-transmission cables. The Chinese government hopes that the relocation of energy bases into these inland areas will improve employment opportunities for local people and revenue opportunities for provincial governments, which can be reinvested to bring down socio-economic disparities with China's more developed coastal areas.