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Consultant talks China to legislators
Wenran Jiang, brought in by LB&A, describes how China brings in, pays for, needed resources, often in exchange for infrastructure Kristen Nelson Petroleum News
Wenran Jiang, Ph.D., has been a special advisor on China to the Energy Council, which is where Sen. Bert Stedman, R-Sitka, chair of the Legislative Budget & Audit Committee, became familiar with his work. LB&A has now contracted Jiang to provide legislators with a perspective on China.
Jiang gave two fast-moving presentations Feb. 22 in Juneau, first in the Senate and then in the House, covering China’s demand for liquefied natural gas and why Alaska and its LNG supply are of interest.
China had 50 years of remarkable growth, Jiang said, with a 7.5 percent 50-year compounded growth rate, and while its gross domestic product growth has slowed, its total GDP value keeps growing, and by 2030 is projected to have 80 percent more economic capacity than the United States, supplanting the U.S. in economic dominance with 18 percent of global economic power in 2030, compared to 10 percent for the U.S. In 1973, by comparison, the U.S. had an 18.6 percent share of global economic power.
On steroids Jiang called it a modernization paradigm on steroids, pursued by Chinese leadership looking for GDP growth at any cost, which has included pollution. That modernization made China the primary driver of increased energy demand in this decade, he said, although India will take over in the 2020s.
China has 1.4 billion people, four times the population of the U.S., with only about half of the country urbanized. As more Chinese urbanize, Jiang said, they will consume more energy and goods. By 2040, China’s energy use could double that of the U.S. It surpassed the U.S. as the world’s top energy consumer in 2009, and its oil consumption has outpaced its production since the early 1990s.
Pollution China still burns a lot of coal, Jiang said, and with that comes a lot of pollution. In addition to its big population, it is also a big manufacturer, another cause of pollution, with coal use mainly responsible for CO2 emissions.
And the Chinese public is demanding pollution reduction, he said.
In the country’s current five-year plan there is a major shift to more efficiency, to more balance between development and environment. Targets in China are very dynamic and growing, he said, driver not just by population growth, but by directed change.
Energy is imported overland by pipeline from central Asia and from offshore sources such as Australia and Qatar, as liquefied natural gas.
Everybody wants to sell LNG to China, Jiang said. Chinese demand is growing and the country is adding a lot of capacity, building LNG terminals along the coast. It is also worried about energy security and looking to expand its markets.
Investment Jiang said China is known for massive worldwide resource investments and has done deals which include building infrastructure in exchange for copper, building infrastructure and providing loans in exchange for oil. China has deep pockets for overseas assets, with some $4 trillion in foreign exchange compared to Japan with $1.28 trillion and the European Union with $0.737 trillion. China is investing all the way down to the Horn of Africa and all the way to Europe - and they’re not planning, they’re doing it, Jiang said.
Referring to the Alaska LNG project, he said that size of investment is nothing new for China; he said the country has done this level or project or more all around the world just in the last 10-15 years alone.
China has built infrastructure in change for resources, with the investment a loan to be repaid in resources.
And in addition to the silk road west to Europe, China wants an Arctic silk road, he said, investing in the Arctic with Russia in Yamal and not only investing in the project but building LNG modules and LNG tankers for the project in China.
He said Alaska will be dealing with many of these collaborative issues of who will build what where for the project.
National companies China’s national oil companies are the China National Petroleum Corp., China Petroleum & Chemical Corp. or Sinopec, CNOOC Ltd. and Sinochem Group. The first three used to be the energy ministry in China, he said, but it was broken up to form the companies, with China National Petroleum Corp. responsible for the area north of the Yangtse River, Sinopec the area to the south of the river and CNOOC offshore. Because most of China’s refineries were in the south Sinopec had a downstream focus, but now the companies are breaking the model, Jiang said, all wanting to be large integrated oil companies.
Sinopec is the smaller player so far in LNG import, so they have room to expand Jiang said. And the U.S. is already exporting LNG to China, growing from nothing in 2016 to account for 3 percent of Chinese LNG imports in the first half of 2017.
But not all foreign investments have gone well, Jiang said, and there is now full scale bureaucratic scrutiny in China of such foreign investments.
The Bank of China and Sinopec have learned from Canadian investment, he said, with some $35 billion poured into Canada and some investments not doing well. As a result, there is an investment shift from Canada to the U.S.
Questions have been asked about investments which went bad and there is some soul searching going on, Jiang said, and the Chinese are cautious and are hard negotiators
China is the world’s largest growing market for LNG, driven both by population growth and by policy change. While the energy market is volatile, everybody sees potential.
And, he noted, the Alaska Gasline Development Corp. is well aware that a lot of work remains to turn their memorandum of understanding into an agreement.
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