China seeks regional energy co-op as challenges mount

China is seeking to diversify channels for energy cooperation as it faces mounting challenges from surging energy demand, geopolitical risks and price volatility, officials and experts said at an international expo in held in west China's Xinjiang Uygur autonomous region.

The endowment and distribution of China's resources does not match the current situation of China's economic development, said Zhang Lei, vice president of the Central Asia Regional Economy Institute under the Xinjiang University of Finance and Economics, at the Expert's Group Meeting on Energy Efficiency in Northeast and Central Asia.

The group meeting was initiated by the Economic and Social Commission for Asia and the Pacific (ESCAP) of the United Nations as part of a series of activities held at the ongoing second China-Eurasia Expo in Urumqi, capital of Xinjiang.

"Although the country's western regions have seen increasing energy production capacities, a weakened ability to guarantee domestic energy security is still prominent," Zhang said.

The International Energy Agency (IEA) has forecast that 65 percent of China's crude oil consumption will depend on imports by 2015. It will be difficult for China to bypass its heavy dependence on oil imports.

Zhang said if China's energy consumption maintains the rapid growth seen in the past two decades, total oil consumption will exceed 650 million tonnes, well beyond the durability of the economy and the environment.

Threats to energy security come not only from surging imports of energy resources, but also from unstable factors in source countries and regions, Zhang said.

Currently, China's oil imports mainly come from the Middle East, Africa and Latin America. Imports from the Middle East account for about a half of the country's total oil imports.

Although China has explored diversified import channels, the significance of the Middle East in its energy import structure is irreplaceable.

Jia Xinpeng, an expert at the China West and East Economic Research Institute, said the shipping of the country's energy imports depends heavily on the straits of Hormuz and Malacca, which may create relatively high risks for oil transportation.

Liu Hongpeng, chief of the Energy Security and Water Resources department of the ESCAP, said all countries are actively seeking regional energy cooperation to ensure energy security.

"Central Asia has abundant energy resources, while China has a stable demand for energy. Cooperation between the two sides has excellent prospects," Liu said.

Premier Wen Jiabao said at the opening ceremony of the six-day China-Eurasia Expo that west and central Asian countries are China's most important partners for energy cooperation.

"Our cooperation in this field has expanded from simple imports and procurement to both upstream and downstream sectors covering design, prospecting, refining, processing, storage, transport and maintenance," Wen said.

Wu Guihui, chief engineer of the National Energy Administration of China, said at the expert's meeting that Xinjiang is facing a great strategic opportunity for development, as it is adjacent to eight countries in Eurasia.

Xinjiang, which covers one-sixth of China's land mass, borders several key regional players, including Russia, Kazakhstan and Pakistan. The region has abundant oil and gas reserves.

"China-Kazakhstan oil and gas pipelines have started operation. The second cross-border railway between China and Kazakhstan has been successfully linked up. The China-Kyrgyzstan-Uzbekistan highway will go into full operation soon," Wen said.

Sound infrastructure can promote people-to-people exchanges and help drive economic cooperation and trade, Wen said.

"China should build more energy projects, such as the China-Central Asia natural gas pipelines and the China-Kazakhstan oil pipelines, and hasten the creation of new energy pipelines between China and Russia," Wen said.

Organizers said the expo, slated to run from Sept. 2 to 7 this year, has attracted several heads of states and governments, participants from 55 countries and regions and six international organizations this year.