Asia Climate Security : Perception and Reality A China Energy perspective A presentation at the Roya

1
Asia Climate Security Perception and
Reality A China Energy perspectiveA
presentation at the Royal United Services
Institute for Defence and Security Studies,
Whitehall, London, 24 April 2007

• Andrew K.P. Leung,
  SBS, FRSA
• Founder and
  Chairman
• Andrew Leung International
  Consultants Limited

2
Hunger for Energy

• Global Industrial Revolution 21st C
• Historys largest and fastest urbanisation and
  industrialisation
• Already 41 urbanised, to increase to 60 by 2020
  
• 85,000 km expressway in 30 years US Interstate
  by 10,000 km
• 7 arteries radiating from Beijing 9 N/S 18 E/W
• 19 m cars (2005) 8_at_1000 500_at_1000 US to jump
  to 130 m by 2020 (Goldman Sachs)
• 24 m jobs p.a. need to stay even
• The looming approach of Chinas greying period
• China 94 energy self-sufficient but 77 from
  coal
• 40 crude oil imported (target 12-15) (Japan,
  almost all India 60-70)

3
Scramble for Oil

• Saudi Arabia (17 supply 90 day strategic oil
  reserve 100,000 cu m at Zhenhai 2nd in Qingdao,
  both completed)
• Iran Yadavaran US 20b
• Kazakhstan 1200 km pipeline completed for 10 mb
  to N Xinjiang
• SCO ( Russia, Kazakhstan, Kyrjystan, Tajikistan,
  Uzbekistan observers India, Pakistan, Iran,
  Afghanistan, and Turkey)
• Africa (1/3 supply) Sudan and Angola
• South America Venezuela as key supplier as
  Brazils 3rd largest oil export destination US
  backyard with centre-left tendencies
• Russia modified eastward pipeline but
  increasing cooperation
• Australia upbeat with China but Osaka Gas won
  25-yr deal for 1.5 m tonnes (cheaper and cleaner)
  LNG p.a. from Gorgon field (NW) (2.5 m tonnes for
  US W Coast for 20 yrs)
• Japan dispute over fields in East China Sea (7
  trillion cu ft of natural gas and 100 b barrels
  of oil)

4
Environmental degradation

• China achieves in 20 what has taken the West 100
  yrs , but now faces the environment problems of
  100 yrs Pan Yue, Vice Minister, SEPA
• Worlds largest emitter of SO2
• Set to overtake the US as the worlds largest CO2
  emitter by 2009
• Pollution costs 8 billion yuan a year in
  healthcare (Fudan) Air pollution kills 400,000
  p.a. (Jamestown Review, 2005) Environmental loss
  12-13 of GDP
• 1/10 energy _at_US, 1/5 _at_Japanese but 2 x _at_Indian
• Energy _at_GDP 7x Japan, 6x US and 3 x India
• 7 of worlds arable land for 20 world
  population
• Desertification 25 of land already desert
• _at_ freshwater 1/3 world average, very unevenly
  distributed 64 land with 20 water
• 7 main rivers and 25 of 27 main lakes already
  polluted 1/5 cities face water shortages, 90
  have pollution problems 500 m without access to
  safe drinking water
• Chinas Water Crisis, Ma Jun (voted by Time
  Magazine as one of worlds 100 most influential
  persons, May 2006)
• Yellow River running dry due to increased
  irrigation, urbanisation, silting, and climate
  change its floods threaten 78m (When the Rivers
  Run Dry, Fred Pearce, 2006).
• First-ever National Assessment Report on Climate
  Chaos (26.12.2006)
• Av temp in China to rise 1.3 -2.1 degrees C by
  2020
• Glaciers on Qinghai Tibet Plateau shrinking by
  131.4 sq km p.a.
• Those in Western China melting down by 27.2 by
  2050
• Extreme weather conditions floods, draughts,
  diseases, water and food scarcity
• Calls for dramatic transformation of Chinas
  development model

5
Energy security and geopolitics

• Supply
• By 2020 ME will account for 83 of global oil
  reserves (up from 2/3 at present),
• Debate notwithstanding, the topping point is in
  sight (now 3 decades?) Half Gone, Jeremy
  Leggett, 2005
• Not how much is left but how soon can it be got
  out?
• Transportation
• Much passing through Iran-controlled Strait of
  Hortmuz and Strait of Malacca (controlled by US
  with naval base at Changi, Singapore)
• Hence alternative land supply routes e.g Central
  Asia, Russia, Gwadar Port
• Geopolitics
• Scramble for Oil
• Oil politik Russia and Iran
• Territorial disputes
• 1996 Iran and Libya Sanctions Act
• Economics cost (2004 price rise decreased
  Chinas GDP by 0.8) and volatility,
  industrialisation, urbanisation, income,
  employment, overall development
• Environment

6
Drive for Sustainable Development

• The impossible American Dream
• 11th Five Year Plan (2006 -10) 4 saving 2
  reduction p.a.
• China to invest US 2.3 trillion in energy
  development 2001-30 (IEA)
• US 200 b on renewable energy next 15 yrs ( 7-10
  p.a. by 2010 and 20 p.a. by 2020)
• 2 nuclear power stations p.a. for next 15 years
• S/N Water Diversion Project (US 60 billion)
• Three Gorges Dam to increase hydroelectric power
  from 108 GW to 290 GW by 2020 Chinas full
  potential at 400 GW
• Wind power ( Inner Mongolia) to grow from 1 GW
  to 30 GW by 2020, for 13-30 million households by
  2020
• 30 m solar households e.g Tibet (60 of world)
  photovoltaic energy 65 MW, to increase to 300 m
  sq meters for 2 GW by 2020 ( 40 million tonnes
  of coal p.a.) NYSE-listed Suntech, within worlds
  top ten
• SASOL to build CTL plant in Ningxia and Shaanxi
  at total cost of US 10 b
• (10 m tonnes of crude oil by 2010 30 m
  tonnes by 2020 16 of Chinas crude output)
• Attractive current cost US 15 per barrel
• 3rd largest ethanol producer 1 b gallons p.a.
  in Heilongjiang, Jilin, Liaoning, Anhui and Henan
  - Mandated use of gasohol
• Incentives for energy crops (GM) e.g. corn,
  sugar cane, sweet sorghum, and sweet potato
  (corn 20 grain production so drive for
  rapeseed, waste and biomass)
• US 8 b plant-oil plantation project in
  Kalimantan, Indonesia, threatens 1.8 m hectares
  of virgin forest (2/3 size of Belgium)
• Worlds first Eco-city at Dongtan on Chiongming
  Island, to open in time for Shanghai Expo 2010

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Energy Cooperation

• Priorities Energy Supply Security,
  Exploration, Coordination, Efficiency, Safety,
  Clean and Sustainable Energy R D and
  Technologies
• New Dehli initiative (Mani Shankar Aiyar,Indians
  Oil Minister, 11. 2005) 20,000 km oil and gas
  pipelines linking Russia, Japan, S Korea, China,
  India, Thailand, Myanmar, Bangladesh, Pakistan,
  Iran and Central Asia. (Iran-Pakistan-India
  pipeline could extend to Yunnan, China)
• Yadavaran China (50) India (20) Sudans
  Greater Nile Project China (40) India (25)
• Pakistans Gwadar Port offers alternative route
  overland for ME and Africa oil
• Five-country Energy Ministers Meeting, Beijing,
  16.12.2006 (China, India, Japan, S Korea, and US)
• Asian Energy Agency? (AEA IEA)
• China exploiting only 40 m of 7.3 billion tonnes
  standard coal equivalent of renewal energy
  resources
• Cost reduction technology for renewables
  large-scale power 20 expensive if produced in
  small hydropower stations, 70 biomass or wind
  and 10-17 times with solar cells.

8
Chinas energy agenda

• Five challenges
• (a) Supply shortfall
• (b) Production capacity
• (c) Coal pollution
• (d) Obsolete technology
• (e) Supply and price volatility
• President Hu at G8 Dialogue at St Petersburg
  (17.7.2006)
• (a) cooperation, coordination and diversification
• (b) promotion of R D in clean, safe, economic,
  and sustainable energies
• (c) geopolitical environment conducive to global
  energy security and stability
• International Thermo-nuclear Energy Reactor
  (ITER) 35 yr project for inexhaustible, clean and
  safe fusion energy EU, Japan, China, India,
  Korea, Russia and US

9
Climate Security

• Climate Change (IPCC)
• Whole forest types disappearing
• Gulf Stream disrupted
• Biodiversity loss
• Sea-level rise
• Global insurance industry threatened
• Food and water supplies at risk
• Human health at risk
• Consequential local, regional, and international
  conflicts
• Threat to societal stability
• Amplifying feedbacks e.g melting permafrost
  (methane24CO2)), dying forests, receding
  glaciers and icefields
• Possible Tipping Point of Runaway Effect
• 
  
  (Half
  Gone Jeremy Leggett, 2005)
• Water Crises
• Melting glaciers deplete sources for the Ganges,
  Indus, Brahmaputra, Salween, Irradwaddy, Mekong,
  Yangtze
• Ever deeper boreholes drying up irreplaceable
  aquifers (some arsenic)
• Dams threaten ecosystems and fisheries in river
  basins (e.g. Mekong) and caused floods during
  extreme rainfalls
• Rotten vegetation in reservoirs - 1/5 man-made
  methane (7 man-made greenhouse effect)
  aircraft emissions most needed for electricity
  and irrigation for water and energy-intensive
  industries e.g. textiles
• By 2025, water demand for domestic and industrial
  use to increase by 2/3 scarcity expected to
  reduce global food production US grain harvest

10
A Green Bonanza?

• Surge in green investments worldwide (Economist,
  18 November 2006) Aggregate US 63 b (2006) US
  49 b (2005), US 30 b (2004), growing 20-30 p.a.
  (biggest job and wealth creation opportunity in
  21st C?)
• UN set up carbon trading exchange in Beijing (FT,
  5 Feb, 2007)
• Intergovernmental Panel on Climate Change (IPCC)
  2007 Report echoed by Bush (State of Union
  Address), UK and rest of world
• Toyota developing new generation of Prius BMW
  pioneering with hydrogen fuel cars GM announced
  plan to sell hydrogen-cell vehicles by 2010
  Japan plans 50,000 fuel-cell vehicles by 2010
  China R D at US 200 m p.a. for past few years
  to be world leader in hydrogen-fuel-cell cars
  172 prototypes and 87 hydrogen filling stations
  already created worldwide
• New urban planning and transport systems
• Possible new 21st C lifestyle to drive
  Eco-Industrial Revolution (21st C Management,
  Matthew Kiernan, 1996) or Ecological Civilisation
  (Pan Yue, Vice Minister, Chinas State
  Environmental Protection Administration, February
  2007)
• China sets up new State Foreign Exchange
  Investment Corporation to invest growth (US 210 b
  p.a.) of Chinas huge foreign currency reserve
  an opportunity to kill many birds with one stone?
• Partnership with Petrodollars?

11
Thank you

• Andrew
  K.P.Leung, SBS, FRSA
• www.andrewleunginternation
  alconsultants.com
• Founder and Chairman, Andrew Leung International
  Consultants Limited
• Chairman, China Group, Institute of Directors
  City Branch, London
• Chairman, China Group, Royal Society of Arts,
  London Region
• Senior Consultant, MEC International
• Member, Executive Committee, 48 Group Club
• Member, Governing Council, Kings College London
• Member, Advisory Board, China Policy Institute,
  Nottingham University
• Invited Member, ATCA (Asymmetric Threats
  Contingency Alliance) - elite global think-tank
• Visiting Professor, NIMBAS Graduate School of
  Management, Holland
• Visiting Professor, Business School, Sun Yat-sen
  University, China
• Visiting Professor, Business School, Lingnan
  University, China
• Global Business Agent, Changsha City, China