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13 the national bureau of asian research nbr conference report | october 2009 China’s Energy Role in the Middle East and Prospects for the Future Philip Andrews-Speed PHILIP ANDREWS-SPEED is Professor of Energy Policy and Director of the Centre for Energy, Petroleum and Mineral Law and Policy at the University of Dundee. His research focuses on energy policy, regulation and reform, and the interface between energy policy and international relations. He can be reached at . 15 CHINA’S ENERGY ROLE IN THE MIDDLE EAST u ANDREWS-SPEED C hina’s international energy strategy is based on the premise that the country is set to be a substantial net importer of oil and gas for the foreseeable future. Some 50% of the country’s oil consumption, or about 4 million barrels per day (mmbpd), is met by imports. Though gas imports are currently limited to a single liquefied natural gas (LNG) terminal, the scale is set to grow as new LNG terminals are commissioned and when a gas pipeline from Turkmenistan is completed. Depending on how rapidly demand picks up as China emerges from the current economic recession, net imports of oil could double to 8 mmbpd between 2015 and 2020, which compares with total oil imports to the United States today of about 13 mmbpd and to Japan of about 5 mmbpd. Imports of gas to China could rise from 4 billion cubic meters per year (bcm/yr) today to as much as 100 bcm/yr by 2020. This compares to Japan’s current level of LNG imports, which stands at about 90 bcm/yr. Thus, by 2020 China will almost certainly be one of the major oil and gas importing regions in the world, alongside the United States, the European Union, and Japan. The Middle East (excluding North Africa) holds about 60% of the world’s proven conventional oil reserves and about 40% of the world’s proven natural gas reserves. Despite this abundance of resources, this region accounts for a disproportionately small share of internationally traded oil and gas (35% and 25% respectively) and an even smaller share of world oil and gas production (31% and 12% respectively). This relatively low contribution to internationally traded oil and gas is set to change over the next ten to twenty years as an increasing number of oil and gas exporters around the world become net importers as a result of declining reserves, rising domestic demand, or both.1 As a consequence, all countries that rely on imports of oil and natural gas will unavoidably become progressively more reliant on the Middle East. In the longer term, perhaps beyond the year 2030, new forms of energy for transport and for static uses may result in a steady decline in the demand for oil and natural gas, and unconventional sources of oil and gas may become more readily available. In such circumstances, the relative importance of the Middle East may decline. Yet even so, the role of Middle Eastern countries in world energy markets is likely to grow substantially from 2010 to 2030. Thus, on the one hand, there is China, the world’s fastest-growing major importer of oil and gas, and, on the other hand, the Middle East, a region set to dominate world oil and gas supplies for the next two decades. It is therefore no surprise that diplomatic, economic, and energy relations between China and the countries of the Middle East have systematically deepened over the last ten years. The apparent simple logic behind this convergence of strategic energy interests is, however, illusory (at least in part) for a number of reasons. First, the international strategic importance of the Middle East means that no relationship between a Middle Eastern state and China can be a purely bilateral matter. Considerations relating to regional stability and to third-party interests and influences are unavoidable. Second, each country in the Middle East has its own political and economic characteristics and priorities that will determine the nature and direction of its relations with China. Third, even within the energy sector itself, four sets of interests may be identified: those of China’s government, of China’s national oil companies (NOC), of the Middle Eastern governments, and of their NOCs. While acknowledging that the first and second sets of factors are of unarguable importance in determining the current and future nature of energy relations between China and Middle Eastern 1 John V. Mitchell and Paul Stevens, Ending Dependence: Hard Choices for...


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