01-09-04

Continued price hikes and fluctuant oil price once more add to the uncertain factors in the world economy. Also the "triumphantly advancing" dependence on oil import leaves China with uncertainty about oil security. Under the tough high oil price and growing uncertainty in international oil market China as a big oil consumption country is faced with a severe challenge.

According to authoritative estimates China's dependence on oil import would continue to increase by 2020. While the pressure of import is higher than ever before, while simply "diversifying sources" is not enough to ease the crisis how many options does China have in reducing oil dependence? How much room do we have for saving oil consumption?

The automobile, which was once beyond reach and is now a dream for most Chinese people, is a giant devourer of oil resources as well as a place where the biggest hope for saving oil consumption lies. Data from the National Bureau of Statistics show that the possession number of private cars reached 24 mm in 2003 and oil consumption by motor vehicles exceeded 60 mm tons. Estimate by the oil department is that oil consumed in transportation accounted for about 45 % of the total oil consumption.

Development Research Centre of the State Council estimated that China's automobile possession number would reach 56.69 mm by 2010 and 130 mm by 2020. By then fuel demand of automobiles would be 138 mm tons and 256 mm tons respectively -- a figure about half of the national oil demand.

Possessing an automobile and consuming oil are certainly a reasonable demand. The problem is that currently motor vehicles' fuel consumption level is generally 10 % to 20 % higher in China than in developed countries. One of the key factors is that China has not established fuel consumption standards for motor vehicles.

The question that needs to be reflected upon is obviously not only "oil consumption" in its technical sense. Mini cars declared by Japan to be "beneficial to society that should enjoy tax reduction, insurance premium reduction and exemption from tollage" are banned from many cities in China. The guidance function and oil consumption consequence are quite obvious.

An oil researcher made a calculation. On the basis of the automobile possession number and fuel consumption in 2003 China could save more than 10 mm tons of oil if each automobile saved 20 % of the fuel. The figure is tantamount to China's growth of finished oil products this year as estimated by relevant departments.

Reasonable utilization and saving do not occur only in the oil consumption link. Experts pointed out that waste in the oil refining and processing link must also be taken into special recognition.

During the sessions of the NPC (National People's Congress) and the CPPCC (Chinese People's Political Consultative Conference) this year an expert pointed out sharply the problems of high energy consumption, low light oil recovery rate and poor product quality in domestic small refineries.

"By comparing a big refinery with a processing ability of 16 mm tpy and a group of small refineries with an ability of 0.5 mm tpy the actual difference in light oil recovery rate is about ten percentage points." said the expert.
The reading of this percentage is that if 20-odd mm tons of oil is given to a big refinery to process, 2 mm more tons of light oil products can be produced each year. In other words 2.75 mm tons of crude oil can be saved in producing the same amount of oil products. From this it can be seen that the oil saved by effectively containing wastes by many small refineries in the processing link can be stupendous.

Experts believe the best way to solve the oil shortage problem of China and ensure secured oil supply is to adopt an "oil import substitute strategy". China's potential for developing "substitute energy" is vast.
A report by petrochemical departments shows that China's apparent fuel consumption reaches 43.84 mm tpy, accounting for 16 % of the total oil consumption, a majority of which is used as boiler fuel and fertilizer material. Through means such as coal substitute, gas substitute, coke substitute and other energy saving measures at least 60 % of the fuel can be saved or replaced.

China has rich reserves of coal. Currently recorded coal reserves have exceeded 1 t tons and exploitable reserves are above 110 bn tons. The solution for the problem of insufficient oil reserves and fuel supply problem must be established in finding a way in coal liquefaction technology, experts say.

As learned, China has begun to conduct research on direct liquefaction of coal since the end of the 1970s and has launched cooperation with relevant overseas research institutes. A direct liquefaction project with an ability of producing 5 mm tons of finished oil products each year and an investment of 2.5 mm yuan has started construction in the Shendong mining area of the Shenhua Group.

Experts estimate that natural gas has accounted for more than 23 % in the world's primary energy consumption structure. After 2020 it may surpass coal and oil to become the most important energy in the world.

In China natural gas is making up only 2 % of the energy consumption, far below the world's average level. China has more than 2 tcm of ascertained natural gas reserves that remain exploitable. On the basis of the production level in 2002 they can be exploited for another 70 years. Experts believe as a reasonable natural gas pricing system is established and being driven by projects such as the "west-to-east natural gas transmission", "sea-to-land natural gas transmission" and "natural gas outward transportation project in Sichuan", China's natural gas industry will have a good development prospect. "Substituting natural gas for oil" is quite realizable in certain energy supply fields.

Frequent oil crises have made major oil consumption countries draw lessons from past experience. Some developed countries have embarked on a full wing shift from an oil-dominant energy consumption structure toward diversification.

Confronted with an oil bottleneck our only choice is to face up to reality. And there are only two options for the solution: one is to improve completely China's energy consumption structure and gradually reduce the dependence of economic development on oil resources.

Second is to gradually change China's industrial structure and pursue a path of sustainable development. For a developing country such as China this is a rough path full of thistles and thorns. But it is the only way.