Domestic and alternative sources of energy can provide only a fraction of the country's needs. The government calls on the public to use energy more efficiently.

Beijing (AsiaNews/Agencies) – Experts expect China's oil imports to increase dramatically despite greater use of domestic and alternative energy sources. With an annual economic growth rate averaging more than 9 per cent, Beijing must find additional foreign oil and gas supplies whilst limiting its overall reliance on foreign sources through conservation and higher nuclear and hydroelectric power output.

For this reason, in the last six months China's state-owned oil companies have invested heavily, often paying premium prices, in foreign oil fields. At the same time, China's goal is to reduce its dependency on oil supplies from a region, the Middle East, that is unstable. Thus, China National Petroleum Corp. (CNPC), agreed in August to invest US$ 4.2 billion for an oil producer in neighbouring Kazakhstan that can deliver oil to China via a recently-opened pipeline, and will pay US$ 576 million with an Indian partner for access to a Syrian oil field. China National Offshore Oil Corporation or CNOOC is paying US$ 2.3 billion for a share in a Nigerian offshore oil field.

Beijing signed an agreement with India last month to share information on what they pay for foreign assets in an effort to avoid costly bidding wars. This is important since the two countries' energy needs and those of other developing countries are driving up oil prices.

China's needs are such that Beijing is willing to sign deals with countries like Sudan, Iran and Venezuela which are largely boycotted by the international community.

Chinese investments in Canada and the US are causing unease in Washington as well. Last year, CNOOC Ltd. gave up an US$ 18.5 billion takeover bid for Los Angeles-based oil company Unocal Corp. after the US Congress opposed the deal might jeopardise US security.

"There is a strategic element to it," said Kevin Norrish, an energy analyst for Barclays Capital in London. "It's something that we've seen before. Japan was doing the same thing about 10 to 15 years ago, with a lot of its natural resource companies, including oil companies, buying into foreign projects."

China's oil firms began investing abroad in the late 1990s, after double-digit economic growth outstripped supplies from domestic fields that had met its needs for decades. Rising family incomes have led to an explosion in private car sales, while industry demands for plastics and other petrochemical products have soared.

However, China's strategy will never provide energy security. Deals currently being signed by oil-producing countries only give foreign investors a share in output for a limited time, rather than control of the oil field, said Leo Drollas, chief economist for the Center for Global Energy Studies in London. In some countries, the domestic situation remains uncertain and might change. According to Drollas, it might be safer to sign long-term contracts to buy oil on the open market.

The government is pushing conservation measures and more use of nuclear power, wind turbines, hydroelectric dams and other alternative sources in order to reduce the country's reliance on foreign oil. Plans call for building 30 nuclear plants by 2020, but funds have yet been allocated.

Even so, such plans remain modest, calling for nuclear power to supply 4 percent of the country's needs by 2010, with an additional 5 percent from wind and solar generators.

In the foreseeable future, China will continue to rely, even increase its use of coal. (PB) 

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