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RI, China’s bid for energy security

  • Hanan Nugroho

Cambridge, Massachusetts | Tue, November 20 2012 | 11:30 am

As the “waking dragon” of China, a rapidly growing economy of 1.4 billion people living in a developing state, transforms into the world’s largest economy, its amazing economic growth will coincide with a fantastic jump in its energy consumption.

Based on statistics from the US Department of Energy, China’s primary energy supply grew by more than fourfold during 1980-2010. Its oil consumption grew nearly by five times, from about 2 million barrels per day (mbpd) to close to 9 mbpd. Electricity consumption jumped fantastically from 262 billion kilowatt-hours (bkwh) to 3,634 bkwh.

China is currently the world’s biggest consumer of coal and the second-largest consumer of oil.

China used to meet its energy demand mostly by relying on domestic reserves. Having one of the world’s largest coal reserves, the country is the largest producer as well. Its oil reserves are the largest in the Asia-Pacific region, with production reaching about 4 mbpd, while its natural gas is the second-largest. In addition, China is the world’s largest producer of electricity from renewable sources. Its hydroelectric power capacity was 231 giga-watts (GW) in 2011, nearly seven times Indonesia’s total generating plants of 34 GW. China also generated 63 GW of electricity from wind power.

However, as the waking dragon’s energy demand skyrocketed, its domestic reserves were no longer adequate, forcing it to import fossil fuels in particular. China is currently the world’s second largest importer of oil, and also imports natural gas and electricity.

To feed its leap in consumption, China has been quick in building energy infrastructure on a scale unprecedented anywhere else in the world. Oil pipelines are being built to connect domestic markets and to facilitate imports, i.e. from Kazakhstan, Russia and Myanmar. Gas pipelines are being built to carry gas from Central Asia, whereas some of 15 LNG receiving terminals are operating, being constructed or planned.

China’s electricity development is extremely remarkable. In 2005, its generating capacity was 519 GW; by 2011, capacity had doubled to 1,073 GW, making it the largest in the world. In addition, China generates some 12.5 GW from nuclear power plants and is promoting further the development of the sector.

The waking dragon is actively hunting for energy in several places, including Africa, Central Asia, the Middle East, South America and Australia. The giant China National Offshore Oil Company (CNOOC) is also working in Indonesia.

What does China’s quest for energy mean for Indonesia?

When China turned into a net oil importer in the early 1990s, it relied on Indonesia, which at that time was Asia’s largest oil exporting country. However, as its demand for oil imports has soared, Indonesia’s contributions became too small and almost negligible. This was also due to sharp decline in Indonesia’s export capacity as a result of a decline in production and growing domestic demand.

China’s consumption of natural gas is still small but the country is anticipating the delivery of vast volumes of natural gas. This year, China’s three first LNG receiving terminals started operating. The Fujian terminal has gas delivered from Tangguh in West Papua.

Even though China produces a huge amount of coal (3.8 billion tons in 2011), its consumption has grown at a faster rate (2011’s consumption was three times higher than 2000’s) forcing it to start importing coal in 2009. Indonesia currently supplyies about half of China’s coal imports.

China might improve its notorious energy efficiency; however as the country continuously attempts to lift hundreds of millions of its people out of poverty, its energy consumption will continue to grow, and the waking dragon will continue its hunt for energy, not to mention other resources.

We in Indonesia — the government and the private sector — might profit from China’s thirst for energy by selling the archipelago’s fossil fuels as we are currently doing, despite a worrying trend for coal. Hopefully, however, this is a temporary orientation.

Despite its status as world-class exporter of coal and LNG, Indonesia’s reserves of oil, gas and coal are actually not that large the global scale and remain unable to meet China’s hunger for energy. Without jeopardizing the environment and sacrificing our own energy security, it is almost impossible for us to keep up with China’s expectations for energy, not to mention India, whose economic performance rivals China and, therefore, is also eying Indonesia as a source of its energy imports.

We aspire to become one of the world’s largest economies one day in the not-too-distant future. In fact, our current consumption of energy (the engine of economic growth) is still much lower than what is required to bring our economy to levels of prosperity. To fulfill these aspirations, there is no option other than to securing our own energy supplies.

China’s need for energy imports will remain, along with India’s. However, it is better to prioritize our own energy security than to hastily serve the export demands of our giant neighbors.

The writer is a research fellow at Harvard University, Cambridge, Massachusetts, US.



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