Chart 3-2: Oil Prices vs. Natural Gas Prices 1994 to 2011
3.2 Energy Interests of China in Central Asia
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to be completed by 2015. 117
3.1.2.2.3 The Third Phase of China’s SPR Plan 118
The third phase of SPR facilities construction is forecasted to have a total capacity of 180 million barrels by 2020. The total capacity of the three phases of SPR facilities will amount to approximately 500mb.
3.2 Energy Interests of China in Central Asia
3.2.1 China Seeks to Exploit Multiple Energy Routes due to Increasing Energy Demands
China became a net oil importer in 1993. China's demand for oil has been surging ever since, in response to its increasingly rapidly expanding economy. In 2003, China became the
second-largest consumer of petroleum products behind the United States. To prevent any energy shortage, China set up a special fund that aims to establish overland pipeline routes and to invest in overseas oil and natural gas infrastructure and assets. Given Kazakhstan’s massive reserves and geographic position close to China, this nation is an ideal candidate for economic cooperation. Despite the fact that Turkmenistan is not neighboring China, through utilization of pipelines via Uzbekistan and Kazakhstan to China, Turkmenistan’s natural gas is exported to China.
Chinese scholars Ming Ting-Chuan (明庭權) and Han Shwe-Fong (韓學峰) (2004)
http://www.iea.org/publications/freepublications/publication/name%2c28189%2cen.html, (accessed: 20140308).
117 “Strategic petroleum reserve (China),” Wikipedia.org, available at:
http://en.wikipedia.org/wiki/Strategic_petroleum_reserve_(China), (accessed: 20131230).
118 “People’s Republic of China, 2012” International Energy Agency (IEA), 2012, p11-12, available at:
http://www.iea.org/publications/freepublications/publication/China_2012.pdf, (accessed: 20140225).
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observed in the early 2000's that sources of Chinese importation of crude oil were not
sufficiently diverse, while the routes by which imports were made were vulnerable, except for the fuel sources which could be imported from Russia or Central Asia, all imports were arriving to China via sea routes. Moreover, 80% of these seaborne imports are coming via one route through the Indian Ocean via the Straits of Malacca and then through the South China Sea. This route is particularly subject to impediments such as blockades by foreign powers, pirates ranging out of Somalia as well as endemic to the Straits of Malacca. Therefore, as a means of improving China's energy security and strategic interests, the development of better relations with the Central Asia nations is crucial. 119
3.2.1.1 China’s Energy Demands are increasing due to its Booming Economy
China has a rapidly growing economy, which has driven the country's high overall energy demands, especially its demand for oil, and the quest to secure energy resources. Rapidly increasing energy demands have made China an extremely important player in regard to the world’s energy markets and these demands have a huge impact on China’s economic
development as well. China’s demands for oil have doubled over the past decade, increasing from 3.3 million barrels per day (bpd) in 1995 to 6.8 million barrels per day (bpd) in 2005.
“The country's further development faces constraints regarding energy, resources and the environment. These are our basic national conditions. This is the real China,” Premier Wen Jiabao said on September 23rd, 2010 at the annual general session of the UN General
Assembly. During those ten years, oil consumption in China grew at an annual rate of 6.66%, while the growth rate for oil production was barely 1.75%, making the country a net oil importer since 1993. China's demand for oil has been surging ever since, in response to its increasingly rapidly expanding economy.
3.2.1.2 China’s Counter-Measures to prevent an Energy Shortage
119 明庭權、韓學峰，「21 世紀中國石油安全與中國中亞石油戰略」，蘭州學刊 5 (蘭州: 2004): 46-48。
[Ming, Tingquan and Xuefeng Han. 21shiji Zhongguo Shiyouanquan Yu Zhongguo Zhongya Shiyouzhanlue (21st Century China’s Energy Security and their Petroleum Strategy in Central Asia), Lanzhou Academic Journal 5 (Lanzhou: 2004): 46-48.]
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There are several major impediments to China's energy security such as insufficient domestic oil production, and global resource scarcity. Therefore, China has shown increasing interest in oil-producing countries in recent years and seeks cooperation with Russia, Central Asian and African countries to ensure a secure supply of energy for its economic development.
120 In spite of that fact, the problem of a lack in domestic crude oil stockpiles is getting worse. Thus, China is exploring ways to use some of its huge foreign exchange reserves to set up a special fund to enhance domestic production and conserve in regard to consumption of energy resources. 121
Moreover, this special fund also aims to establish overland pipeline routes from abroad for import of hydrocarbon fuels for domestic consumption, to assist the Chinese petroleum industry to invest in overseas oil and natural gas infrastructure and assets, and to invest in global resource futures on markets abroad. If China can become better integrated with the economies of such nations then China can better utilize imported energy supplies from not only the Middle East but from Russia and Central Asia in a stable manner long-term.
3.2.1.3 China’s Ideal Candidate for Energy Cooperation in Central Asia
In terms of the production of energy within the five-nation, Central Asia region, Kazakhstan is the foremost producer, followed by Turkmenistan and then Uzbekistan – while Kyrgyzstan and Tajikistan’s production is negligible. It is estimated that Kazakhstan's proven oil and gas condensate reserves amount to some 5.3 billion tons, while it reserves-to-production ratio for oil is 7:10. Given its massive reserves and geographic position close to China, this nation is an ideal candidate for economic cooperation. 122
120 魏百谷，「中國油氣公司在中亞的能源布局」，中亞政經情勢與挑戰: 2012 年（桃園：健行科技大學
歐亞研究中心，2012 年），頁 40。[Wei, Baiku. Zhongguoyouqigongsi Zai Zhongya De Nengyuanbuju (Strategy and operation of Chinese oil companies in Central Asia), Zhongya Zhengjingqingshi Yu Tiaozhan : 2012 Nian (The Political and Economic Situation and Challenge of Central Asia 2012) (Taoyuan:
Chien Hsin University of Science and Technology Graduate Institute of Central Asia Studies Publishing, 2012):
40.]
121 Bao, Yi. “China’s Strategic Interests in Central Asia: Cooperation with Central Asian Countries,” Central Asia and the Caucasus 5 (Sweden: 2001): 97-99.
122 陳章華，「中國與中亞能源合作之探究」，中亞政經情勢與挑戰: 2012 年（桃園：健行科技大學歐亞
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The Central Asian states sit atop enormous natural gas deposits. Turkmenistan possesses the world's fourth largest reserves of natural gas resources, which is the largest among all the Central Asian countries, followed by Uzbekistan and then Kazakhstan.
According to the Ministry of Commerce (MOFCOM) of the Government of the People's Republic of China, Turkmenistan possesses 2.9 trillion cubic meters of proven gas reserves, while, Uzbekistan has 1.9 tcm, and Kazakhstan has 1.8 tcm.
Moreover, in the first eight months of 2012 Turkmenistan revealed that it had increased its access to existing natural gas resources within the country by 10.1% and that increase in tapped resources also resulted in a 12.8% increase in exports. Despite the fact that
Turkmenistan is not neighboring China, we can infer that the bulk in this increase was in exports to China, through utilization of pipelines via Uzbekistan and Kazakhstan to China, which in turn allows the transit countries to also profit from export of Turkmen natural gas to China.
In regard to the circumstances of Kyrgyzstan and Tajikistan’s potential to also cash in on transit of energy resources, due to the less stable conditions in the countries as well as geographical features (e.g. extremely mountainous, harsh winter climate) that would make the construction and engineering of such pipelines difficult, despite their advantageous proximity to China, they have yet to cooperate in such transit schemes.
3.2.2 The Benefits for China to exploit energy in Central Asian Countries
In the work “Geo-politics of Petroleum and Natural Gas in the New Century,” (1998) Xu Xiao-jie(徐小杰) mentions that China is eager to extend its influence westward and with the
研究中心，2012 年），頁 86。[Chen, Changhua. Zhongguo Yu Zhongya Nengyuanhezuo Zhi Tanjiu (The research on the energy cooperation between Central Asia and China), Zhongya Zhengjingqingshi Yu Tiaozhan : 2012 Nian (The Political and Economic Situation and Challenge of Central Asia 2012) (Taoyuan: Chien Hsin University of Science and Technology Graduate Institute of Central Asia Studies Publishing, 2012): 86.]
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establishment of the Central Asia-China gas pipeline which not only meet eastern China’s energy demands, but also enhance economic development of China’s western regions. In Chang Hsimo(張錫模)’s 2004 work “中亞區域安全淨評估” (‘A General Assessment of Central Asia’s Regional Security’), the author asserts that (as of 2004) China is an influential player in the region however it trails Russia and the US in regard to its influence.
In the work published in 1998, “Geo-politics of Petroleum and Natural Gas in the New Century,” Xu Xiao-jie(徐小杰) mentions that China is eager to extend its influence westward and with the establishment of the "Central Asia-China gas pipeline corridor" then it is easily seen that China’s interests in the region are as follows: 123
1) China can utilize oil and natural gas resources from Central Asia to satisfy energy demands especially in its expansive western regions that had previously been somewhat unfulfilled.
2) These western regions (especially “Xinjiang”) can also benefit from the economic integration that comes from these developments particularly in regard to economic advancement, stability, technical integration with local production and opening up of links to the neighboring countries.
3) China can play a more active role in the affairs of all of Eurasia through greater links, particularly through the development of a “Eurasian Land Bridge” or “New Silk Road” by providing infrastructure to better integrate China’s geopolitical and economic spheres with those of Russia and the Middle East.
In 2004 work “中亞區域安全淨評估” (Zhōng yà qūyù ānquán jìng pínggū, or ‘A
General Assessment of Central Asia’s Regional Security’), Chang Hsimo(張錫模) asserts that (as of 2004) China is an influential player in the region however it trails Russia and the US in
123 ，社會科學文獻出版社：北京）世界的油氣地緣政治新，徐小杰1998 年 4 頁，（月 154-155。[Xu, Xiaojie. Xinshijie De Youqidiyuanzhengzhi (The Oil Geo-politics in the New World) Social Science Literature Publishing, (Beijing: April 1998): 153-157.]
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regard to its influence, and it has three main national interests, as follows: 124
1) Security – Central Asia has become a key focus of world geopolitical concern, which on