More than ever before, China needs oil. Hard won through a mix
of domestic exploration and overseas procurement, oil is essential
to feed the nation's rapidly expanding economy. This has now seen
over two decades of sustained growth. Annual crude oil imports
reached 90 million tons last year, and are projected to hit 100
million tons this year.
To ease the impact of any potential energy shortages on the
Chinese economy, the government is working on establishing
strategic oil reserves in the coastal areas.
However without detracting in any way from the importance of the
oil reserve, some energy experts say there is also a need to
establish a coal reserve. They believe that this should be
undertaken as a matter of priority and cite the example of the
recent Sino-EU coke trade dispute. The EU wants China to increase
its coke export quota and has threatened to take the matter to the
World Trade Organization (WTO) for arbitration.
It is quite ironic that China, a country with its own energy
supply shortages, finds itself pressurized into continuing to
supply massive exports of an important coal derivative. Time and
again, China's manufactured goods find themselves facing
anti-dumping challenges in overseas market, but no one seems to
want to restrict their imports of China's energy resources.
This year, China's domestic demand for coal is expected to reach
1.78 billion tons. Taken together, the four major industrial
sectors of power generation, metallurgy, building materials
manufacture and fertilizers will consume 1.58 billion tons, up 12.9
percent on the previous year. Meanwhile exports will exceed the 80
million ton mark.
Energy expert, Han Xiaoping, says, "The fundamental reason for
China to slash its coke export quota lies in China's deepening
energy crisis. China's current coal reserves and rates of
exploitation are just not sufficient to continue to sustain the
rapid development of the Chinese economy.
Statistics from the State Administration of Coal Mine Safety
show that at the end of April, the coal stock was 98 million tons,
down 19.1 percent year-on-year. This was the lowest level of coal
stocks seen in the past couple of decades. Meanwhile soaring coal
prices are pushing up the cost of industrial products together with
the cost of living.
Professor Xu Zhongbo of Beijing University of Science and
Technology says, "China is paying insufficient attention to its
abundant coal reserves as it pursues new overseas oil sources". The
professor points out that coal can be used as a raw material for
the production of oil and gas, so coal should be a priority for an
energy security reserve.
Guo Yuntao, the director of the China Coal Development Research
Center, said at a recent international forum in Beijing that
China's rapid economic growth has been underpinned by heavy
consumption of energy and raw materials. He estimates that by the
year 2020, coal consumption will account for some 65 percent of
China's total energy consumption. He anticipates minimum demand at
that time will be 2.4 billion tons, over 0.7 billion tons more than
the output in 2003.
Guo said, "It's only a matter of time until a coal reserve is
set up."
Another official from the Ministry of Land
and Resources, Zeng Shaojin said, "The issue of a coal reserve
is a matter of concern for the top leaders and they are preparing
to bring in the necessary measures. For instance, the ministry has
stopped the issue of new coal exploitation licenses. The eleventh
Five-year plan will also reportedly bring forward plans for a
strategic coal reserve."
A coal reserve strategy might be expected to address these key
areas:
·?In order to better secure the nation's coal resources,
special protection should be given to state-level coal exploitation
zones, to key coal mines and to sources of rare and important types
of coal.
·?The system for providing finance and investment for
exploration of new coal reserves should be strengthened.
Exploitation should be better resourced and commercial exploitation
should be encouraged. There should be further geological
exploration in areas around existing coal mines.
·?Operations should be put on a sound commercial footing
and where necessary this could mean transferring or auctioning the
mining rights. Priority should be given to extending the working
lives of existing mines. Proper operational procedures should be
strictly implemented in new mines.
·?Technical innovations should be utilized to raise average
coal recovery rates from the current 30 percent to 50 percent and
this figure should be over 60 percent in medium and large
mines.
Professor Xu cautioned that administrative responsibilities are
currently divided, so creating potential for inefficiency and
losses. The National Energy Bureau under the National Development
and Reform Commission is responsible for long-term forecasts and
for the strategic oil reserve. But short-term forecasts of supply
and demand for oil are handled by the Economic Operations Bureau.
And what's more, the coal sector is entrusted to the commission of
China's Coal Industry Association.
He called for the establishment of a new unified administration,
such as an Energy Ministry, to streamline and coordinate China's
long-term energy strategy.
(China.org.cn by Tang Fuchun June 17, 2004)