China is an energy-starved nation. “China is growing like America was growing in the last century”, explains one Chinese energy expert, “but without the indigenous [oil and gas] reserves.” China’s main source of energy is coal, of which it has plenty. Around 20 percent of its energy comes from oil, and that share is set to continue to rise as more Chinese buy cars. Between 1997 and 2007, China’s booming demand for oil accounted for approximately one-third of world oil demand growth, and China is now the world’s second largest oil consumer behind the US. In 2010, China’s oil demand reached 9 million b/d, of which it covered less than half from its own production. This gap is set to grow further: the IEA forecasts that China will have to import over 70 per cent of its oil in 20 years time.
China’s demand for gas is growing at an equally fast pace, albeit from a much lower base. In 2008, China consumed 85 bcm, according to the IEA. It produced most of this at home and imported only a small share through LNG. Gas at present accounts for only around 3 per cent of China’s total primary energy mix, but Beijing aims to increase the use of gas to 250 bcm in 2015, which would be roughly 8 per cent of its energy mix. This would require China to import over 100 bcm that year. Since China is concerned about the safety of sea lanes, it will want to import a good portion through pipelines rather than in the shape of LNG shipments.