China, Oil and Global Politics

Although oil composes less than a fifth of China’s energy supply, the size of the country’s economy and its rapid growth in recent decades—as well as sharply declining domestic production—have propelled China into international oil markets. Oil is critical in fueling the country’s transportation system, and China is both the world’s second largest oil consumer and third largest importer. China was an oil exporter until 1993, but by 2009 it was importing more than half of the oil it consumed, an amount expected to double by 2020. This volume examines oil in the context of China’s energy policy, and explores both the domestic and international dimensions of China’s quest for oil.

Part one surveys China’s energy strategy, the government institutions managing energy policy, and the oil industry. Although the country was the fifth largest oil producer in 2010, its total output was only 5 % of global production, and its reserves are not expected to last more than 10 years at current production levels. Though some 90 % of China’s overall energy needs in 2009 were satisfied by domestic supplies, increases in domestic production are being outpaced by increasing demand.

The authors use “path dependency” to explain China’s preference for energy autonomy, which has limited foreign participation to off-shore oil exploration. The first order of business in China’s energy policy is security of supply, to which other objectives, such as efficient use of resources and environmental protection, are subordinate. The energy policy making system is fragmented and uncoordinated, and rivalries exist between parallel government agencies, the most important of which is the National Development and Reform Commission (the state’s powerful planning body). Three companies dominate the oil industry: CNPC/Petrochina (upstream), Sinopec (downstream)—both large, vertically integrated enterprises—and CNOOC, a smaller off-shore oil explorer and producer. China’s limited civil society places few constraints on either government or industry, but as a result of the decentralization of government control, state goals encounter active resistance from provincial/local governments. [Download]