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The Energy Industries in China

As with other economic categories, China is a major producer and consumer of energy resources. In 2002, the most recent year available for United Nations statistics, China produced 934.2 million tons of oil equivalent and consumed 889.6 million tons. Per capita consumption was 687 kilograms, only a quarter of North Korea’s estimated consumption, a third of that in Hong Kong, and well below the average for Asia. China’s energy consumption has risen dramatically since the inception of its economic reform program in the late 1970s.

Electric power generation—mostly by coal-burning plants—has been in particular demand; China’s electricity use in the 1990s increased by between 3 percent and 7 percent per year. In 2003 electricity use increased by 15 percent over the previous year, and supplies could not keep up with demand, thus slowing economic development. Government statistics indicate that the overall demand for electric power for 2004 was projected to be around 2 trillion kilowatt-hours, but by June of that year a 60-billion kilowatt-hour shortfall had been projected. Energy production failed to keep up with industrial demand, resulting in power cutoffs throughout most of the country. In 2005 the Chinese Communist Party expressed the determination to reduce energy consumption by 20 percent per capita of the gross domestic product (GDP) by 2010.

China is largely self-sufficient in all energy forms. Its coal production is the highest in the world. Some 75.6 percent of China’s energy was produced from coal in 2004. The coal reserves are among the world’s largest, and mining technology has been improving since the 1990s. Coal has even been exported since the early 1970s.

Petroleum fulfilled 13.5 percent and natural gas 3.0 percent of China’s energy requirements in 2004. The petroleum reserves are large, of varying quality, and in disparate locations. There are oil deposit blocks in the northwest and offshore tracts believed to be among the world’s largest. In December 2004, it was reported that some 20.5 billion tons of oil reserves had been discovered in North China’s Bohai Bay and more than 20 billion tons in Xinjiang’s Tarim Basin.

There also are an estimated 28 billion cubic meters of natural gas in Xinjiang, 100 billion cubic meters in Sichuan, and 200 million cubic meters in Inner Mongolia, as well as substantial natural gas reserves offshore. Even though it has exported petroleum since the early 1970s, China, nevertheless, is a net importer of crude petroleum because the required high grades of petroleum are not available domestically. Imports of mineral fuels totaled 6.6 percent of the cost of total imports in 2002. In 2004 Russia agreed to expand its oil exports to China. With deliveries sent by railroad, the two countries expected oil deliveries to China to reach 10 million tons in 2005 and 15 million tons in 2006. However, China’s total petroleum imports were expected to exceed 100 million tons in 2005.

China’s hydroelectric potential is the greatest in the world and the sixth largest in capacity. However, in 2004 hydroelectric power produced only 7.9 percent of China’s energy needs. The Three Gorges hydropower project in Hubei Province on the Yangzi River started delivering power to eastern and central provinces in July 2003 and is expected to produce 84.7 billion kilowatt-hours per year when the project is completed by 2009. The main wall of the dam was completed in 2006, two years ahead of schedule.

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