China looks for energy security by keeping coal centre-stage

Energy security is high on the Chinese government's agenda. 

It ties in closely with Beijing's Belt and Road initiative, and has now also become intertwined with the trade war with the US, which has squashed Chinese imports of US crude and LNG.

It was my privilege to join the discussion panels on "Geopolitical risks in the Middle East" and "Oil and gas market in the Asia-Pacific" at the Global Forum on Energy Security in Beijing over Sep 17-18, as well as listen to international experts at the event.

Some of my key takeaways:

• China's abundant coal reserves are seen as an important pillar of its energy security; their use needs to advance cleaner technologies. 
• China’s “green financing” goes into coal projects, running contrary to international norms. China's banking sector and regulators are working to evolve standards on green finance.
• Some of the countries that have joined BRI have been kept waiting for energy investments even as oil majors continue to retreating in the face of low returns from projects needing heavy infrastructure funding. Myanmar is an example of a country left disappointed.
• More multilateral structures for investment and fuel pricing liberalisation may be the answer for the above problem.
• US-China trade war is hurting both sides in the energy sector. US shale companies are already under pressure from declining oil and gas prices, heavy debt burdens and severe erosion of market cap. China has lost access to US crude that is cheaper than similar light-sweet grades.

From left: Dr Wang Pei (Head of Research, Unipec), Anton Safronov (CCO, Parami Energy), Vandana Hari (Founder, Vanda Insights), Ihsan Malik (Consultant, ISA Energy).

• The US has “crossed the rubicon” with regard to its relationship with China. No matter who the president is after the 2020 elections, trade relations with China will not go back to where they were before Trump. The US may not be able to force structural changes in the Chinese economy – that is Trump’s biggest challenge. 
• China’s overall gas supply security is “manageable” as abundant global resources, with main future growth to be concentrated in Asia-Pacific EM countries. Beijing will focus on growing domestic gas output, diversifying imports, and building underground gas storage. A new national oil and gas pipeline corporation is expected to be established this year. The overhaul will involve current pipeline infrastructure of the state-owned giants separated into a new company.
• Chinese refined product exports are set to continue booming and will leave exports from Japan, South Korea and India far behind.