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11
Asia Climate Security : Asia Climate Security :
PPerception and Realityerception and Reality –– A A China
EnergyChina Energy perspectiveperspective
A presentation at the Royal United Services Institute for
DefencA presentation at the Royal United Services Institute for
Defence e
and Security Studies, Whitehall, London, and Security Studies,
Whitehall, London, 24 April 200724 April 2007
Andrew K.P. Leung, SBS, FRSAAndrew K.P. Leung, SBS, FRSA
Founder and ChairmanFounder and Chairman
Andrew Leung International Consultants LimitedAndrew Leung
International Consultants Limited
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Hunger for EnergyHunger for Energy
•• Global Industrial RevolutionGlobal Industrial Revolution
2121stst C C
•• History’s largest and fastest urbanisation and
industrialisationHistory’s largest and fastest urbanisation and
industrialisation
•• Already 41% urbanised, to increase to 60% by 2020 Already 41%
urbanised, to increase to 60% by 2020
•• 85,000 km expressway in 30 years > US Interstate by 10,000
85,000 km expressway in 30 years > US Interstate by 10,000
kmkm
•• 7 arteries radiating from Beijing; 9 N/S; 18 E/W7 arteries
radiating from Beijing; 9 N/S; 18 E/W
•• 19 m cars (2005) = 8@1000 ~ 500@1000 US 19 m cars (2005) =
8@1000 ~ 500@1000 US –– to jump to to jump to 130 m by 2020
(Goldman Sachs)130 m by 2020 (Goldman Sachs)
•• 24 m jobs p.a.24 m jobs p.a. need ‘to stay even’need ‘to stay
even’
•• The looming approach of The looming approach of China’s
‘greying period’China’s ‘greying period’
•• China 94% energy selfChina 94% energy self--sufficient but
sufficient but 77% from coal77% from coal
•• 40% crude oil imported40% crude oil imported (target
12(target 12--15%) (Japan, almost all; India 15%) (Japan, almost
all; India 6060--70%)70%)
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Scramble for OilScramble for Oil
•• Saudi ArabiaSaudi Arabia (17% supply; 90 day strategic oil
reserve: 100,000 cu m at (17% supply; 90 day strategic oil reserve:
100,000 cu m at
ZhenhaiZhenhai; 2; 2ndnd in in QingdaoQingdao, both completed),
both completed)
•• IranIran –– YadavaranYadavaran US 20bUS 20b
•• KazakhstanKazakhstan –– 1200 km pipeline completed for 10
1200 km pipeline completed for 10 mbmb to N to N
XinjiangXinjiang
•• SCOSCO (+ Russia, Kazakhstan, (+ Russia, Kazakhstan,
KyrjystanKyrjystan, Tajikistan, Uzbekistan + observers: ,
Tajikistan, Uzbekistan + observers: India, Pakistan, Iran,
Afghanistan, and Turkey)India, Pakistan, Iran, Afghanistan, and
Turkey)
•• Africa Africa (1/3 supply) ~ Sudan and Angola(1/3 supply) ~
Sudan and Angola
•• South AmericaSouth America –– Venezuela as key supplier; as
Brazil’s 3Venezuela as key supplier; as Brazil’s 3rdrd largest oil
export largest oil export destination destination –– US backyard
with centreUS backyard with centre--left tendenciesleft
tendencies
•• Russia Russia –– modified eastward pipeline but increasing
cooperationmodified eastward pipeline but increasing
cooperation
•• AustraliaAustralia upbeat with China but Osaka Gas won
25upbeat with China but Osaka Gas won 25--yr deal for 1.5 m tonnes
yr deal for 1.5 m tonnes (cheaper and cleaner) LNG p.a. from Gorgon
field (NW) (2.5 m ton(cheaper and cleaner) LNG p.a. from Gorgon
field (NW) (2.5 m tonnes for nes for US W Coast for 20 yrs) US W
Coast for 20 yrs)
•• JapanJapan –– dispute over fields in East China Sea (7
trillion cu ft of natudispute over fields in East China Sea (7
trillion cu ft of natural gas ral gas and 100 b barrels of oil)and
100 b barrels of oil)
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Environmental degradationEnvironmental degradation•• ‘‘China
achieves in China achieves in 20 20 what has taken the West what
has taken the West 100 yrs100 yrs , but now faces the environment ,
but now faces the environment
problems of problems of 100 yrs100 yrs’ ’ –– Pan Pan YueYue,
Vice Minister, SEPA, Vice Minister, SEPA
•• World’s largest emitter of World’s largest emitter of
SO2SO2
•• Set to overtake the US as the world’s largest Set to overtake
the US as the world’s largest CO2CO2 emitter by 2009emitter by
2009
•• Pollution costs 8 billion Pollution costs 8 billion yuanyuan
a year in a year in healthcare healthcare ((FudanFudan) ) Air
pollutionAir pollution kills 400,000 p.a. kills 400,000 p.a.
(Jamestown Review, 2005) Environmental loss = 12(Jamestown Review,
2005) Environmental loss = 12--13% of GDP13% of GDP
•• 1/10 1/10 energy @energy @US, 1/5 @Japanese but 2 x
@IndianUS, 1/5 @Japanese but 2 x @Indian
•• Energy @GDPEnergy @GDP 7x Japan, 6x US and 3 x India7x Japan,
6x US and 3 x India
•• 7% of world’s 7% of world’s arable landarable land for 20%
world populationfor 20% world population
•• DesertificationDesertification –– 25% of land already
desert25% of land already desert
•• @ @ freshwater freshwater = 1/3 world average, very unevenly
distributed = 1/3 world average, very unevenly distributed –– 64%
land with 20% water64% land with 20% water
•• 7 main 7 main riversrivers and 25 of 27 main and 25 of 27
main lakeslakes already polluted; 1/5 already polluted; 1/5
citiescities face water shortages, face water shortages, 90% have
pollution problems; 500 m without access to 90% have pollution
problems; 500 m without access to safe drinking watersafe drinking
water
•• China’s Water CrisisChina’s Water Crisis, Ma Jun (voted by
Time Magazine as one of world’s 100 most , Ma Jun (voted by Time
Magazine as one of world’s 100 most influential persons, May 2006)
influential persons, May 2006)
•• Yellow River running dryYellow River running dry due to
increased irrigation, urbanisation, silting, and climatedue to
increased irrigation, urbanisation, silting, and climatechange; its
floods threaten 78m (change; its floods threaten 78m (When the
Rivers Run DryWhen the Rivers Run Dry, Fred Pearce, 2006). , Fred
Pearce, 2006).
•• FirstFirst--ever ever National Assessment Report on Climate
ChaosNational Assessment Report on Climate Chaos
(26.12.2006):(26.12.2006):
•• Av temp in China to rise 1.3 Av temp in China to rise 1.3
--2.1 degrees C by 20202.1 degrees C by 2020
•• Glaciers on Qinghai Tibet Plateau shrinking by 131.4 sq km
p.a.Glaciers on Qinghai Tibet Plateau shrinking by 131.4 sq km
p.a.
•• Those in Western China melting down by 27.2% by 2050Those in
Western China melting down by 27.2% by 2050
•• Extreme weather conditions Extreme weather conditions ––
floods, draughts, diseases, water and food scarcityfloods,
draughts, diseases, water and food scarcity
•• Calls for dramatic transformation of China’s development
modelCalls for dramatic transformation of China’s development
model
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Energy security and geopoliticsEnergy security and geopolitics••
SupplySupply ––
•• By 2020 ME will account for 83% of global oil reserves (up
from By 2020 ME will account for 83% of global oil reserves (up
from 2/3 at present), 2/3 at present),
•• Debate notwithstanding, the topping point is in sight (now ~
3 dDebate notwithstanding, the topping point is in sight (now ~ 3
decades?) ecades?) –– Half Half Gone, Jeremy Leggett, 2005Gone,
Jeremy Leggett, 2005
•• Not how much is left but how soon can it be got out?Not how
much is left but how soon can it be got out?
•• Transportation Transportation ––
•• Much passing through IranMuch passing through
Iran--controlled Strait of controlled Strait of HortmuzHortmuz and
Strait of Malacca and Strait of Malacca (controlled by US with
naval base at (controlled by US with naval base at ChangiChangi,
Singapore), Singapore)
•• Hence alternative land supply routes Hence alternative land
supply routes e.ge.g Central Asia, Russia, Central Asia, Russia,
GwadarGwadar PortPort
•• Geopolitics Geopolitics ––
•• Scramble for OilScramble for Oil
•• Oil Oil politikpolitik –– Russia and IranRussia and Iran
•• Territorial disputes Territorial disputes
•• 1996 Iran and Libya Sanctions Act1996 Iran and Libya
Sanctions Act
•• EconomicsEconomics –– cost (2004 price rise decreased China’s
GDP by 0.8%) and cost (2004 price rise decreased China’s GDP by
0.8%) and volatility, industrialisation, urbanisation, income,
employment,volatility, industrialisation, urbanisation, income,
employment, overall overall developmentdevelopment
•• EnvironmentEnvironment
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Drive for Sustainable DevelopmentDrive for Sustainable
Development•• The impossible The impossible American DreamAmerican
Dream
•• 1111thth Five Year PlanFive Year Plan (2006 (2006 --10): 4%
saving + 2% reduction p.a.10): 4% saving + 2% reduction p.a.
•• China to invest China to invest US 2.3 trillion inUS 2.3
trillion in energy developmentenergy development 20012001--30 (30
(IEAIEA))
•• US 200 b on US 200 b on renewable energyrenewable energy next
15 yrs (^ 7next 15 yrs (^ 7--10% p.a. by 2010 and 20% p.a. by
2020)10% p.a. by 2010 and 20% p.a. by 2020)
•• 2 2 nuclear powernuclear power stations p.a. for next 15
yearsstations p.a. for next 15 years
•• S/N S/N Water Diversion ProjectWater Diversion Project (US 60
billion)(US 60 billion)
•• Three Gorges DamThree Gorges Dam to increase hydroelectric
power from 108 GW to 290 GW by 2020 to increase hydroelectric power
from 108 GW to 290 GW by 2020 ––China’s full potential at 400
GWChina’s full potential at 400 GW
•• Wind powerWind power (~ Inner Mongolia) to grow from 1 GW to
30 GW for 13(~ Inner Mongolia) to grow from 1 GW to 30 GW for
13--30 million 30 million households by 2020households by 2020
•• 30 m 30 m solarsolar households households e.ge.g Tibet (60%
of world); photovoltaic energy = 65 MW, to Tibet (60% of world);
photovoltaic energy = 65 MW, to increase to 300 m sq meters for 2
GW by 2020 (= 40 million tonneincrease to 300 m sq meters for 2 GW
by 2020 (= 40 million tonnes of coal p.a.) NYSEs of coal p.a.)
NYSE--listed listed SuntechSuntech, within world’s top ten, within
world’s top ten
•• SASOL to build SASOL to build CTLCTL plant in plant in
NingxiaNingxia and and ShaanxiShaanxi at total cost of US 10 bat
total cost of US 10 b
(10 m tonnes of crude oil by 2010; 30 m tonnes by 2020 = 16(10 m
tonnes of crude oil by 2010; 30 m tonnes by 2020 = 16 % of China’s
crude output)% of China’s crude output)
Attractive current cost US 15 per barrelAttractive current cost
US 15 per barrel
•• 33rdrd largest largest ethanol ethanol producer ~ 1 b gallons
p.a. in Heilongjiang, producer ~ 1 b gallons p.a. in Heilongjiang,
JilinJilin, , LiaoningLiaoning, , AnhuiAnhui and and HenanHenan --
Mandated use of gasoholMandated use of gasohol
•• Incentives for Incentives for energy crops energy crops
(+GM)(+GM) e.g. corn, sugar cane, sweet sorghum, and sweet e.g.
corn, sugar cane, sweet sorghum, and sweet potato (corn= 20% grain
production so drive for rapeseed, waste potato (corn= 20% grain
production so drive for rapeseed, waste and and
biomass)biomass)
•• US 8 b US 8 b plantplant--oiloil plantation project in
Kalimantan, Indonesia, threatens 1.8 m heplantation project in
Kalimantan, Indonesia, threatens 1.8 m hectares of ctares of virgin
forest (2/3 size of Belgium)virgin forest (2/3 size of Belgium)
•• World’s first World’s first EcoEco--city city at at
DongtanDongtan on on ChiongmingChiongming Island, to open in time
for Shanghai Island, to open in time for Shanghai Expo 2010Expo
2010
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Energy CooperationEnergy Cooperation
•• Priorities: Priorities: Energy Supply & Security,
Exploration, Coordination, Efficiency,Energy Supply & Security,
Exploration, Coordination, Efficiency,Safety, Clean and Sustainable
Energy R & D and TechnologiesSafety, Clean and Sustainable
Energy R & D and Technologies
•• New New DehliDehli initiativeinitiative ((ManiMani
ShankarShankar Aiyar,Indian’sAiyar,Indian’s Oil Minister, 11. 2005)
Oil Minister, 11. 2005) ––20,000 km oil and gas pipelines linking
Russia, Japan, S Korea, 20,000 km oil and gas pipelines linking
Russia, Japan, S Korea, China, India, China, India, Thailand,
Myanmar, Bangladesh, Pakistan, Iran and Central Asia. Thailand,
Myanmar, Bangladesh, Pakistan, Iran and Central Asia.
(Iran(Iran--PakistanPakistan--India pipeline could extend to India
pipeline could extend to YunnanYunnan, China), China)
•• YadavaranYadavaran: China (50%) India (20%); : China (50%)
India (20%); SudanSudan’s Greater Nile Project: China ’s Greater
Nile Project: China (40%) India (25%)(40%) India (25%)
•• Pakistan’s Pakistan’s GwadarGwadar PortPort offers
alternative route overland for ME and Africa oiloffers alternative
route overland for ME and Africa oil
•• FiveFive--country Energy Ministers Meetingcountry Energy
Ministers Meeting, Beijing, 16.12.2006 (China, India, , Beijing,
16.12.2006 (China, India, Japan, S Korea, and US)Japan, S Korea,
and US)
•• Asian Energy Agency? (Asian Energy Agency? (AEAAEA~ IEA)~
IEA)
•• China exploiting only China exploiting only 40 m of 7.3
billion tonnes40 m of 7.3 billion tonnes standard coal equivalent
of standard coal equivalent of renewal energy resourcesrenewal
energy resources
•• Cost reduction technologyCost reduction technology for for
renewablesrenewables: large: large--scale power 20% > expensive
if scale power 20% > expensive if produced in small hydropower
stations, 70% > biomass or wind andproduced in small hydropower
stations, 70% > biomass or wind and 1010--17 times 17 times >
with solar cells.> with solar cells.
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China’s energy agendaChina’s energy agenda
•• Five challengesFive challenges::
•• (a) Supply shortfall(a) Supply shortfall
•• (b) Production capacity(b) Production capacity
•• (c) Coal pollution(c) Coal pollution
•• (d) Obsolete technology(d) Obsolete technology
•• (e) Supply and price volatility(e) Supply and price
volatility
•• President President HuHu at at G8 DialogueG8 Dialogue at St
Petersburg (17.7.2006):at St Petersburg (17.7.2006):
•• (a) cooperation, coordination and diversification(a)
cooperation, coordination and diversification
•• (b) promotion of R & D in clean, safe, economic, and
sustainable(b) promotion of R & D in clean, safe, economic, and
sustainable energiesenergies
•• (c) geopolitical environment conducive to global energy
security(c) geopolitical environment conducive to global energy
security and and
stabilitystability
•• International ThermoInternational Thermo--nuclear Energy
Reactor (nuclear Energy Reactor (ITERITER) 35 yr ) 35 yr
project for inexhaustible, clean and safe fusion energy project
for inexhaustible, clean and safe fusion energy –– EU, EU,
Japan, China, India, Korea, Russia and USJapan, China, India,
Korea, Russia and US
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Climate SecurityClimate Security•• Climate Change Climate Change
(IPCC)(IPCC)
•• Whole forest types disappearingWhole forest types
disappearing
•• Gulf Stream disruptedGulf Stream disrupted
•• Biodiversity lossBiodiversity loss
•• SeaSea--level riselevel rise
•• Global insurance industry threatenedGlobal insurance industry
threatened
•• Food and water supplies at riskFood and water supplies at
risk
•• Human health at riskHuman health at risk
•• Consequential local, regional, and international
conflictsConsequential local, regional, and international
conflicts
•• Threat to societal stabilityThreat to societal stability
•• Amplifying feedbacks Amplifying feedbacks e.ge.g melting
permafrost (methane=24CO2)), dying forests, receding glmelting
permafrost (methane=24CO2)), dying forests, receding glaciers and
aciers and icefieldsicefields
•• Possible Tipping Point of Runaway EffectPossible Tipping
Point of Runaway Effect((Half Gone Half Gone –– Jeremy Leggett,
2005)Jeremy Leggett, 2005)
•• Water CrisesWater Crises•• Melting glaciers deplete sources
for the Ganges, Indus, Melting glaciers deplete sources for the
Ganges, Indus, BrahmaputraBrahmaputra, , SalweenSalween, ,
IrradwaddyIrradwaddy, Mekong, Yangtze , Mekong, Yangtze
•• Ever deeper boreholes drying up irreplaceable aquifers (some
arsEver deeper boreholes drying up irreplaceable aquifers (some
arsenic)enic)
•• Dams threaten ecosystems and fisheries in river basins (e.g.
MekDams threaten ecosystems and fisheries in river basins (e.g.
Mekong) and caused floods during extreme rainfallsong) and caused
floods during extreme rainfalls
•• Rotten vegetation in reservoirs Rotten vegetation in
reservoirs -- 1/5 man1/5 man--made methane (7% manmade methane (7%
man--made greenhouse effect) > aircraft emissions made
greenhouse effect) > aircraft emissions –– most most needed for
electricity and irrigation for water and energyneeded for
electricity and irrigation for water and energy--intensive
industries e.g. textilesintensive industries e.g. textiles
•• By 2025, water demand for domestic and industrial use to
increasBy 2025, water demand for domestic and industrial use to
increase by 2/3; scarcity expected to reduce global food e by 2/3;
scarcity expected to reduce global food production > US grain
harvestproduction > US grain harvest
•• Water at heart of regional conflicts inc the West Bank and
GolanWater at heart of regional conflicts inc the West Bank and
Golan heights, and Kashmirheights, and Kashmir
•• WaterWater--related catastrophes wiped out ancient
civilizations of Angkor related catastrophes wiped out ancient
civilizations of Angkor WatWat and the Mayans?and the Mayans?
((When the Rivers Run Dry When the Rivers Run Dry –– Fred
Pearce,2006)Fred Pearce,2006)
•• Balance between Balance between Industry and
AgricultureIndustry and Agriculture? ? –– Also China’s 11Also
China’s 11thth FYPFYP
•• New global lifestyle needed?New global lifestyle needed?
11stst 1988 Conference, 75 Nobel Prize Laureates concluded ‘If
mankind1988 Conference, 75 Nobel Prize Laureates concluded ‘If
mankind is to survive 21is to survive 21ststCentury, the ancient
wisdom of Confucianism (harmony with NatureCentury, the ancient
wisdom of Confucianism (harmony with Nature) must be revisited.’ )
must be revisited.’ cfcf Environmentalism, Renewable
Environmentalism, Renewable Energies, rain, fog and dew harvesting
(
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1010
A Green Bonanza?A Green Bonanza?•• Surge in Surge in green
investmentsgreen investments worldwide (worldwide
(EconomistEconomist, , 18 November 200618 November 2006): ):
Aggregate US 63 b (2006) >US 49 b (2005), US 30 b (2004),
growinAggregate US 63 b (2006) >US 49 b (2005), US 30 b (2004),
growing 20g 20--30% 30% p.a. (biggest job and wealth creation
opportunity in 21p.a. (biggest job and wealth creation opportunity
in 21stst C?)C?)
•• UN set up UN set up carbon tradingcarbon trading exchange in
Beijing (exchange in Beijing (FT, 5 Feb, 2007FT, 5 Feb, 2007))
•• Intergovernmental Panel on Climate Change (Intergovernmental
Panel on Climate Change (IPCCIPCC) 2007 Report echoed by ) 2007
Report echoed by Bush (State of Union Address), UK and rest of
worldBush (State of Union Address), UK and rest of world
•• Toyota developing new generation of Toyota developing new
generation of PriusPrius: BMW pioneering with : BMW pioneering with
hydrogen hydrogen fuel carsfuel cars; GM announced plan to sell
hydrogen; GM announced plan to sell hydrogen--cell vehicles by
2010; Japan cell vehicles by 2010; Japan plans 50,000 fuelplans
50,000 fuel--cell vehicles by 2010; China R & D at US 200 m
p.a. for cell vehicles by 2010; China R & D at US 200 m p.a.
for past few years to be world leader in hydrogenpast few years to
be world leader in hydrogen--fuelfuel--cell cars; 172 prototypes
cell cars; 172 prototypes and 87 hydrogen filling stations already
created worldwideand 87 hydrogen filling stations already created
worldwide
•• New urban New urban planning and transportplanning and
transport systemssystems
•• Possible new Possible new 2121stst C lifestyleC lifestyle to
drive Ecoto drive Eco--Industrial Revolution (Industrial Revolution
(2121stst C C Management, Matthew Kiernan, 1996Management, Matthew
Kiernan, 1996) or Ecological Civilisation () or Ecological
Civilisation (Pan Pan YueYue, , Vice Minister, China’s State
Environmental Protection AdministraVice Minister, China’s State
Environmental Protection Administration, tion, February
2007February 2007))
•• China sets up new China sets up new State Foreign Exchange
Investment CorporationState Foreign Exchange Investment Corporation
to invest to invest growth (US 210 b p.a.) of China’s huge foreign
currency reserve growth (US 210 b p.a.) of China’s huge foreign
currency reserve –– an an opportunity to kill many birds with one
stone?opportunity to kill many birds with one stone?
•• Partnership with Partnership with
PetrodollarsPetrodollars??
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1111
Thank youThank you
Andrew Andrew K.P.LeungK.P.Leung, SBS, FRSA, SBS, FRSA
www.andrewleunginternationalconsultants.comwww.andrewleunginternationalconsultants.com
Founder and Chairman, Andrew Leung International Consultants
LimFounder and Chairman, Andrew Leung International Consultants
Limitedited
Chairman, China Group, Institute of Directors City Branch,
LondoChairman, China Group, Institute of Directors City Branch,
Londonn
Chairman, China Group, Royal Society of Arts, London
RegionChairman, China Group, Royal Society of Arts, London
Region
Senior Consultant, MEC InternationalSenior Consultant, MEC
International
Member, Executive Committee, 48 Group ClubMember, Executive
Committee, 48 Group Club
Member, Governing Council, King’s College LondonMember,
Governing Council, King’s College London
Member, Advisory Board, China Policy Institute, Nottingham
UnivMember, Advisory Board, China Policy Institute, Nottingham
Universityersity
Invited Member, ATCA (Asymmetric Threats Contingency Alliance)
Invited Member, ATCA (Asymmetric Threats Contingency Alliance) --
elite elite global thinkglobal think--tanktank
Visiting Professor, NIMBAS Graduate School of Management,
HollanVisiting Professor, NIMBAS Graduate School of Management,
Hollandd
Visiting Professor, Business School, Sun Visiting Professor,
Business School, Sun YatYat--sensen University, ChinaUniversity,
China
Visiting Professor, Business School, Visiting Professor,
Business School, LingnanLingnan University, ChinaUniversity,
China
Global Business Agent, Global Business Agent, ChangshaChangsha
City, ChinaCity, China