News Xina 14

China's place on the global energy map

Last May a historic contract was announced between the Russian company Gazprom and China's CNPC, for Russia to supply natural gas to China for the next 30 years. The agreement coincided with a deterioration in Russian-Ukraine relations, which still has Europe on tenterhooks because of its heavy dependence on Russian gas.

Contrary to the way in which part of the media interpreted it at the time, the agreement between Russia and China is not a direct upshot of the political tension in Ukraine. It is an agreement that has been in the pipeline for years, in which the main bone of contention has been the price. After ten years of intense negotiations, a settlement was reached that is unarguably beneficial for both parties in that China is very keen to replace coal with gas and Russia wants to increase its share in world LNG exports.

Europe, meanwhile, should not view this alliance with concern, since the amount of gas that Russia will sell to China will be, at the end of the decade, less than 25% of what it currently sells to Europe. Rather than a threat, Europeans should see the Russian-Chinese pact as an opportunity to improve and diversify our energy sources, as China has done in recent years.

The world's top energy consumer seems to be making a firm commitment to natural gas. It is also currently the third greatest gas consumer in the world, after the United States and Russia. The International Energy Agency predicts that by 2019 the country will have upped its demand to 315 bcm.

China imports natural gas via pipelines from various parts of central Asia, such as Turkmenistan, Uzbekistan and Kazakhstan. With the signing of this new contract, it will also receive natural gas from Russia as of 2018.

Furthermore, as part of its strategy to cut coal consumption by using more gas, China is particularly seeking to strengthen LNG imports. This may be key to its energy security, providing there are no supply issues or cuts due to geopolitical disputes, and will also help to tackle the country's burgeoning environmental pollution problem.

China currently receives liquefied natural gas from Australia, Qatar, Indonesia, Malaysia and Papua New Guinea under long-term contracts drawn up by the state-owned companies CNOOC, PetroChina and Sinopec.

In addition, it is thought that the country may have the world's largest reserves of shale gas and although it does not currently have the resources to test and develop it, this is one of the reasons why China is emerging as one of the most significant players in Asia and on the world energy stage.

Natural gas currently accounts for about 4% of China's energy mix, although the government has announced plans to raise this proportion to around 8% by the end of 2015 and to 10% in 2020.

To achieve these ambitious figures, however, it needs a large, robust network of gas infrastructure to produce, import and transport this amount of gas, a challenge that still requires a lot of work.

Media reports that China is seeking to expand its influence in the rest of the world abound. It is true that in recent years many investment funds have expressed an interest in entering international markets, including Spain, which just goes to show how attractive our energy sector is.

However, what is less known and less commented on is that China also looks to Spain to learn from and build on the valuable experience and expertise of our energy companies, knowing that we have a secure, competitive and efficient gas system.

In this regard, Enagás was honoured that a global energy giant such as PetroChina, owned by the CNPC group, contacted our company to conclude various agreements for training the technicians working in its facilities in 2010. The fact that PetroChina wants its engineers to learn from our practices, our technology and our human capital is major recognition of the work that Enagás has performed over the last 40 years, during which we have strived to achieve a meshed infrastructure network to ensure the security of Spanish energy supply.

Agreements such as this are positive not only for companies but also for the country, as they contribute to strengthening our links with China. However, despite the importance of these bilateral relations, we still need more knowledge and awareness of the influence that this Asian power has on the global economy, and specifically on the energy sector. The informative role played by media such as News Engineers Xina, which focuses on a country set to become a key part of the global energy map, is vital to achieving this.

Antonio Llardén
Chairman of Enagás