Posted - Monday, 19 August 2013 - Hellenic Shipping News Worldwide
They say, “What happens in Vegas, stays in Vegas,” but not so in China.
Affairs in the Middle Kingdom have huge global influence – at least the
mundane affairs of economic activity, primary energy use and
environmental impact (in that order of causation). After a dozen boom
years, the impact of small changes in China’s gargantuan condition
triggers repercussion around the world, not the least for major oil and
gas exporters like Canada.
Here’s what’s going on: China’s economy is decelerating, which implies
caution (but not alarm) for oil markets; but its energy diet is becoming
leaner, which rings a positive tone for future natural gas use. A
Chinese transition to more natural gas, much more than the International
Energy Agency (IEA) is forecasting, reinforces the importance of
Canada’s West Coast liquefied natural gas (LNG) prospects.
China’s annual GDP growth has cooled off from its historically
supercharged 10 per cent or more, down to an annualized 7.5 per cent for
the second quarter of this year. Other metrics suggest loss of economic
momentum; its exports are down 3.1 per cent year-over-year; domestic
wages are increasing; manufacturing is weakening; and credit is
crunching. Despite these negative indicators, growth in overall absolute
energy consumption – barrels of oil, tons of coal, cubic feet of gas,
and so on – is still robust and rising. That’s because China’s total
energy use – now 20-per-cent greater than that of the United States – is
compounding off of a much larger base of consumption. In other words,
it doesn’t take as much economic growth on a per-cent basis to draw on
greater amounts of energy in an absolute sense.
Recently released data in the BP Statistical Review of World Energy 2013
tabulates China’s energy use. Figure 1 shows consumption broken down by
each primary source, normalized for energy content, collectively
represented in terms of millions of barrels of oil equivalent (BOE) per
day.
Total Chinese energy consumption remains on a ballistic trajectory.
Continuing expansion of middle class wealth among 1.3 billion people
should continue to drive top line growth of about 3 per cent per year.
And although we can expect both GDP growth and the pull for energy as a
function of wealth creation to moderate over the next decade, China’s
energy consumption is on a course to exceed 75 MMBOE/d by 2025. For
comparison, that level is almost double the current energy consumption
of Europe.
From a societal perspective, the Chinese sub-trends supporting their
total energy diet don’t look healthy, notably an unsustainable call on
coal for power generation, paired against an insignificant
diversification into cleaner alternatives. Shovelling megatons of coal
into the economy is not surprising in hindsight, because it is the only
primary energy source that is scalable enough to bring reliable and
consistent electricity to hundreds of millions of people over a short
period of time.
Investment into renewable energy in China has been widely trumpeted as
being massive; indeed, at $65-billion (U.S.) in 2012 it has been the
largest effort and expenditure in the world. However, the data show that
relative to coal, the still insignificant amount of solar and wind in
the national diet is neither putting the environment in good light nor
blowing the country in the right direction. Coal is still overwhelmingly
dominant.
Yet the data show that China, like all other industrializing countries
preceding it, is in fact on the verge of a “break point,” or a major
energy transition. The biggest change to China’s energy use over the
next two decades will be a significant ramp-up in the use of natural
gas. Detectable changes in the most recent BP Statistical data, combined
with policy statements coming out of China’s leadership, are supportive
of a significant acceleration in natural gas usage between now and
2025.
Throughout the history of energy there is a recognizable pattern in
developing economies, a progression of energy transitions that leads
societies from the simplicity of living off the land, to the intensity
of commuting to an office, labouring on a factory floor and powering up a
modern lifestyle with a high standard of living.
Electricity is the first thing that a developing country seeks. Damming
up rivers for hydro power is where it starts, assuming water flows
through the land. Next is a shift to coal, because it’s cheap and can be
scaled up quickly. Citizens start to buy cars as the powered-up society
gets wealthier, so oil begins to creep into the energy diet at an
accelerated pace.
Wealth begets wealth as the economy grows, which begets more energy
consumption. The use of coal and oil grows rapidly, while hydroelectric
power approaches the limits of the nation’s watersheds. Oil use
continues to grow, because none of the other sources are compelling
enough (yet) to turn the wheels of mobility that everyone wants.
Then the people come to a sudden realization: Their energy use is making
a big mess. The smoggy air can’t be inhaled and the water becomes too
dirty to drink. This is a classic trigger for a “break point,” a
material shift in primary sources. China’s well-publicized pollution
problems earlier this year are contributing factors for change.
In response to a stressed environment, attention turns to using
cleaner-burning natural gas, emissions-free nuclear power and renewable
energy sources like wind and solar. But nukes are very expensive, slow
to build and fraught with radiation phobia. Renewable energy sources
lack scale and can’t deliver consistently in rain or shine, day or
night, especially to large populations. Although nukes and renewables
will continue to grow their share of the mix, natural gas is the only
scalable, clean-burning energy system that can diversify the supply side
over the next two decades.
This pattern of energy system diversification – from water power to a
full array of primary sources – can be seen in the majority of countries
that have industrialized over the past 100 years. By the time top-line
consumption moderates, natural gas typically settles in at 15 per cent
to 20 per cent of a fully-developed country’s energy mix. Yet that’s
potentially a huge number for China; by 2025 the country will probably
be consuming one-and-a-half times as much primary energy as today (the
equivalent of 76 MMBOE/day), which means that natural gas consumption
could reach 55 to 60 billion cubic feet a day, close to what the U.S.
consumes today. Other forecasting agencies are not as bullish, yet there
is plenty of precedent for rapid shifts to natural gas when the call
for diversification comes; South Korea, Japan and many European
countries are good examples.
Forget the math. When you look at China’s consumption profile there are
two things you can bet on without going to Vegas: That coal growth is
unsustainable and natural gas is the only scalable alternative. It’s a
good bet for future suppliers of LNG like Canada.
Source: Globe And Mail
Posthttp://www.hellenicshippingnews.com/News.aspx?ElementId=74f13df8-6e4b-488f-b358-028c7762ec2b&utm_source=newsletter&utm_medium=email&utm_campaign=daily to bto be found at:
e found at:
No comments:
Post a Comment