Well first of all I want to thank Adam for
inviting me one.

Thank you.
Jordy tactlessness for

the workshop is an honor and
pleasure for me to speak here and

also the line into the panelists in
which the cops from Korea under attack.

I thought I will Turkey for you a fifteen
minute version of Trident quest for

energy secure but before I do that.

Let me get US cents off of the expertise
here in this form of China.

How many of you have been to China.

OK So quite a lot.

So I better be careful violent
everything from the council via

they can stick you put that on.

Well I will stop for

them to bust in my
presentation I'll take a look

at China's energy supplier counties
from the viewpoint of my security.

I want to thank you for
president came into the broader loop for

our energy security so that I don't
have to go back to the literature but

I did start to endorse.

I certainly concur with what he said
about the broad broad literature and

its development and
security and the second issue.

I want to examine here is how kind meets
its energy security challenges and

then after I want to look very
quick case study on how China

pursues its always security finally I'll
end with a discussion on the implications

of trying to sell overseas
energy policy for the U.S.

in particular before we
are launching into a discussion on

trying its own energies you're listing a
quick look at China and the audience that

we are all on the same page or you need
to look at China's energy supply mix and

consumption mix the arm the impression and
then become very clear.

China is very cold based economy and
then take a look at the country's energy

demand trajectory over the last or
two decades or so.

It's clear that the Chinese energy economy
is pretty high high self-sufficient.

In contrast musically and engine conked in
Japanese energy economy in the southwest

and free trade is still over ninety
percent currently but they take a look at

the new demand growth really is it's quite
over overwhelming in a sense because

an energy consumption doubled between one
hundred eighty four and two thousand and

that it doubled again between two thousand
and one and two thousand and nine easy in

about eight years or so and generally it's
a lot has changed for example between.

In the eighty's between the eighty's and
the thousands.

The Chinese and.

The Chinese didn't want to Caldwell energy
consumption only double but then since

two thousand to twenty tensing racial
between energy consumption and G.D.P.

when about one and the Chinese government
started this effort in two thousand and

six to bring down energy intensity
vite morning percent between two or

six and two thousand and ten it looks like
the government will miss its target this

year but
it's quite a commendable effort but

does this that activity doesn't reveal
the fall of abilities of the Chinese and

Indian economy to security to
supply security challenges.

Let me just quickly are.

It was the flavor of the energy supply
security challenges facing the Chinese

economy or China became or that that
natural gas can order two thousand and

one comes to natural gas the distribution
of natural gas really I'll give you

up a consensus about the disconnect
between where resources are and

where demand is defined as energy security
and I think that's pretty much true for

a for a lot of other countries and
it also true for for oil and

coal as well if any look
at the map on the left is.

Certainly it's obvious that the natural
gas resources are primarily scattered

around the periphery isn't north north and
China central China whereas the dimension

is really on the east coast saw a couple
issues come up then you have to build

a lot of infrastructure to green gas
to win or it's it's deposited to

where it's needed and the Chinese
government have hasn't really started

to pay much attention to natural gas
until this and this new normal name and

now that gas is grown in some trees
growing at double digit rate right now and

we have that means of growth for me and
China quickly became a net importer of

natural gas try and concentrate on imports
roughly ten percent of natural gas but

according to the International
Energy Agency's projection

China will be importing at least
a forty over forty percent went on for.

And of the moment.

Recently there is a lot of discussion
about unconventional natural gas in China

particular shale gas and
trying to estimate is China has

at least the same amount of unconventional
natural gas as the US has but

it is of course it takes a lot of time to
develop the natural gas and you need mice

mechanisms to be corrected for
unconventional gas to take place and

currently natural gas prices
are still subsidized and

without this price liberalization is
difficult to say that natural gas war.

Will be where the government hopes it
to be for example it took the Chinese

government over a decade to even
bring the percent about four percent.

Right right now that gets you counts for
less than four percent of the China's

total energy consumption and I don't
think the number will go up significantly

before the Chinese government
reforms its gas prices but

I'm happy to talk about natural gas prices
if you are injured during the Q. and

A session because of my Also for
ensuring although coal heat

trying on court counts for eighty over
eighty percent of the country slightly.

Izzie improvise over seventy percent of
the country's total energy consumption and

if you take a look at the coal it's
the same story disconnect between where

resources are and where the next AIDS
defines energy security challenges

in trying to take a look at called
really concentrating Northern China and

the peripheries again or
the East China and Fremont is alone

in more in northern China Shakes
you change you know Mongolia for

over forty percent of the country hold on.

I can stand on my eyes.

I'm right.

So you have this challenge of
moving coal on Massey's on where

the resources are and where the manse
energies which is the East Coast.

And then that that massive challenge.

Often times cause our own
countries room a system and

then the sudden the southern China and
the east coast China.

Oftentimes are designed
to supply shortages.

Whenever you have severe weather
conditions in Northern China

only half of you know
our fast paced economic

development which of course a lot of
coal from north in China and in fact

whom I see is happening on the price all
over in China for last couple years and

prices of more than actually
are depending on the type of coal use.

So call is not cheap in China anymore.

Contrary to the conventional wisdom but
they're good for the East Coast.

That's why missile onsets bill is called
the great hole from overseas Australia in

Asia and elsewhere to the east coast and
secondly it makes a lot of sensible

calls for be close to China to develop
nuclear that's the primary rationale.

Because if you think about nuclear and
coal and

coal fired power the fuel cost only
accounts for one third of the total cost.

Whereas coal fired power.

You mean you know the fuel
cost accounts for

roughly equal over forty
percent right now China.

A little bit higher.

Depending on where you are right now.

So that's why despite the rapid
growth rate of production in

China Thailand has became
kind of the haven that.

Looks like that trend will continue and
although I think the whole room

of minus imports would be small because
you know China has abundant reserves and

right now what's what's the bottom
there is really in the transportation

once the Chinese government restructures
its coal supply bases there was more

capacity to ship called more color
around that that that they more gap.

But as Dr came and
other analysts have said earlier China.

The fact that China became you know
becomes a net coal important or

have a lot implications for
the original coal markets in Asia for

example South Korea now is is under
pressure to find with placement and

Japanese on the same pressure.

But the the on the most
management challenge and

the three security challenge you face in
trying to government occurs in the realm

of the other sector against things
sorting this connect defines the security

hole or in addition to that this that
there's another way of the story

which again is China doesn't have
enough coal or oil reserves on the come

out of bases all the reserves in
China lower their nickel average

Neotel all the resources at
the very very fast in trying for

example a lot of the oil fields around
East Coast have been explored for

over three years the minority oil if you.

For example in north eastern China Dutchy
used to produce over fifty million

fifty million pounds a year and now it's.

It's in a rental for new pounds of muscle.

And so all the World Cup level of the oil
produced in China now is pretty high and

the production cost is very high
to comparison with Middle Eastern

countries and are in countries
that has a lot of implications for

all the overseas expansion of
Chinese oil companies later on we'll

talk about nine hundred
ninety three with this

dichotomy off actually
girls fast mandrels and go

in production a whole nother came in there
or in forty nine hundred ninety three and

since then the trend has made me pretty
much you know you see the big you see this

is an important time to see continuing
to grow always we saw in two thousand.

For example in two thousand
Knight China's in more humans and

one of our fifty percent for
the first time close to sixty percent and

China now is spending billions
of dollars on oil imports and

the nominees in two thousand and
eight when the Chinese were boy.

More expenditure accounted for fourteen
percent of China's total importance.

That translates into one hundred sixty
one dollars and the not number for sure.

Go up because of the more the planet
is it will continue to go up.

According to the the International Energy
Agency again by twenty fifth China will

be importing actually stole find new and
a million barrels a day right now to only

imports five point six million of the
roughly nine number changes from month to

month and sought by then twenty
third the import would count for

at least seventy five percent of
China's total oil consumption and

that that really scares a lot
of decision makers in China.

Why is that one.

Why why the Chinese care
about energy secure or

secure right to go back to the story.

Dr Kim just said the basis of
this clucked of memory and

on matters in China because China
in in you know remember joined

the old days when China branded
the Soviet and then the Soviet cut off.

You know all this applies to the two
countries that after the relationship

soured in the in the sixty's and
then of course was under the in marble

imposed by the US you know before trying
to establish the relation that will

match the motions with the U.S.
So luck went to memory.

I'm really pays a lot of attention
to the ability to control

supply and certainty over supply and
then there is also another factor.

Since ninety eight in I'm being the
survival of the communist regime in China

really hinges on two factors one.

It's taken on the girls because
there's no all the election China.

The system is not a Tory base.

It's really economic growth based So

economic growth against
legitimacy to the regime and

then there is another source of that you
can see what is which is real nationalism.

So the regime now survival of the regime
depends on the stool factors.

And why it's not linked to to energy
security because if you want and

you grow your economy in
an axis in stable economy and

he smiles by the Energies of mines
in China are not sufficient.

And nice and
energy supplies from overseas increases.

Although as and
some coal now in the future and

is all that's one energy security is
a is a really emphasized that needs.

It's high on the radar
screen on Lucia's agenda and

there is nothing that's only invited.

If you look at you know how China is or
where the imports of its oil from for

example look at the data into Lauzon
to the numbers haven't changed that

dramatically since then China in wards
night over ninety percent of all from C.

lines through us through our
through sequence of communications.

However over eighty five percent chance
all imports trying to travel through this

narrow spin off of are the red dots
the red dots really here indicates.

Beyond the normal area and

run out of water we bomb attacks and

all the complications in
the post nine one one world.

This has taken on substance more.

And look at the anti other chart of
the on the money and the map and

then you can get a really
good understanding of how to

think about the supply security
after the sometimes the low and

of course mire to the September eleventh
attacks the US maintain troops in

the countries Japan South Korea ones and
gone Central and

then after the September eleventh U.S.
station choosing Afghanistan Pakistan will

do better stand how to say this is the map
from a card from The Economist magazine.

It's really a well great
illustration of this and

circumvent the siege mentality Chinese
how right now they feel B. C. they feel

the same age the feeling startled by the
US and then think about that when each or

speak unless they talked about the now not
mean usual which is actually limited to

the time when issue to some extent I think
about this the Chinese all trade or any

more is have to travel through this this
narrow street a lot an increase over time.

One by one prices.

You must continually walk on Ana's or
suppliers round them far

cross the narrow street of market and
concentrate one area as

that's the single concern that really
bothers the Chinese come from and

the Chinese news and Chinese
strategists and to resort that issue.

To rezone that's the security
challenges the Chinese government

is taking a holistic
approach to energy security.

The Chinese government is down a lot
on the supply side with man sign and

institutional science.

I don't want to go through everything
because you know you can read this later

on when you have time or
you're interested but suffice it to say.

The Chinese can really start life and
the I think there's

a quite good understanding
that there's no silver bullet.

You have to do everything at your
disposal to has your energy security

both on post domestically and externally.

But also from the supply side and
demand side and the and

the institutional side and just let
me take off a couple of things for

example you have trickle vehicles trying
to it's electric vehicles right now on

a daily basis two thousand cars are added
to the street operating right now and this

number was discontinued girl and China
has about over sixteen million cars and

that number will become you know three
hundred to four hundred by twenty thirty

that of moment drives of oil consumption
is this is this massive cultural

revolution in China and massive for
urbanization each year fifteen

million people migrate from the rural
area to to the cities in China and

rural areas for example urban residents
consume three times more energy

than rural residents in China as you
cannot provide as you know if you were in

the shoes of the Chinese you know prison
or Chinese premier The first thing you've

got to think about in the morning is how
I keep the people off the street right.

I'm always the the take to the street and
then bring the government down rain and

thought that's a really
overwhelming challenge and

let me simply worries about the people
with the Chinese government has down on

domestic little enhanced oil security and
I would do a little his starting a small

place early on China's oil security which
is really the essential part of my book

and which is which was developed on
my arm on the basis of my thesis.

The Chinese government has over the last
couple over the last two decades also dark

major major art have taken couple major
steps to want to get the oil industry.

Ready to deal with the other countries or
security challenges and

the reforms of the oil industry so
that it created a three

seem easy send OPAP and soon and
then there's not a one cent on hand so

trying now from Japan South Korea has a
very very powerful national oil companies.

Although you also see is this now a
growing Japanese out power for the Nazis.

Although Japan aims to have some
of those these By the mid some big

it's Mitsubishi jog mad at Central
that actually do the work overseas and

to trainees for
example since the ninety's.

Since one thousand nine hundred eighty the
Chinese government reform the oil industry

to create create market oriented and
competitive and

commercial listed entities that
are actually ready to take on a challenge.

Then in one thousand nine hundred eight
in the end the Chinese government in one

thousand nine hundred four Chinese
government liberalized my seas which gave

the oil companies enough profit
margin to accumulate profits and

then and span overseas.

That's actually a major factor.

Why these days the Chinese Elsie's
have deeper pockets because price

rises have little lies the subtle you know
in buying from international markets.

You know international crisis and

sell the midst of an international
crisis and have the action at home and

overseas the mic a lot of money off
from upstream although downstream.

That's to constrain because they don't as
you has handed over our product my cities.

That's the area where the the reforms
are still incomplete but

the Chinese numbers mean steps to move
on up on this one and then the other

the other side of the stories as you
are traditionally China has no no.

S. but this has changed.

Look at the amount as perhaps one.

Now and not two thousand and
eight fifty million cubic meter.

I think one Q one Q one.

They make of that matter
is roughly equal to see.

Three times also so.

And this is these are two of these
are is this is adding up very quickly

if your sense of where China
will be around twenty three

twenty sixteen by twenty six in China will
have five hundred million barrels a day

of off farm out five hundred million
barrels of storage capacity.

Now will be the Chinese of
the Chinese economy a lot cushion

against global fluctuations
of oil supplies and.

And price volatility.

Although it remains to be known
how the Chinese government

has to use its strategic
of national resource

because China is not a member of
the International Energy Agency.

So it doesn't have to abide by all
those rules regarding this is a S.P.R.

capacity external to the Chinese
government together with the Chinese

companies or companies have been
diversifying importance and from this.

This is going to Africa
now has become more and

more important accounting for
one third of China's who are Morse whereas

East Asia all the asian the city share
all Asia Pacific has really declined.

If now it is really not that I'm poor and
middle east traditional and

consistently important for
China accounting for over fifty percent.

Well over a little over fifty
percent of China's total or

you imports and then this is again on
the contrast with this Japan South Korea

which are very very highly dependent
on the Middle East the dependency race

the dependency regional is over eight
percent for example in case of South Korea

where China is on the mom in the Middle
East for forty or fifty percent.

However because of the reason is the
pattern of the Middle East China has to

pay for all these oil imports
from the the on the east.

But you know if you take a deeper look
at where China gets its oil companies.

Why is the constant in
the large proportion still who

is concentrated on a small number
of Middle Eastern countries so

that makes China a little
more vulnerable than the US.

If you take a look at how
the US sources its supply it's

the number it looks pretty good sources
are from over seventy countries.

Whereas China sources are from
about forty countries also and

in the first the top ten.

Supplies over eighty percent of
China's total oil supply it's so

there is there's a lot of work there for
the Cheney for the Chinese companies and

the Chinese government to our tool to
move forward and then as as I alluded

to the solicitor overseas mentioned Now
while those in the ninety's the Chinese

oil companies is going out campaign
which was later indorsed by the Chinese

government in two thousand by the former
President Johnson me if I'm out of order.

This is only our campaign and
this Overbeck you know was overseas and

has really started to me are I am
I am I kept a track of the data

model of overseas investment account of
my ask me for example concerns of Assman.

Between one thousand nine hundred ninety
nine in China and invest at least forty or

over forty billion dollars overseas and
across different countries.

Equity all

of that is another item that attracts
a lot of attention and generates

a lot of controversy right now and we're
all in total equity all our production of

over one million dollars a day but
I don't think that that will really play

on a significant role in China's own
security because over fifty only

fifty roughly sixty percent also of equity
all it goes back to China Chinese oil

companies sell most of the equity oil to
the international markets again it's and

this is this you know that continent be
torn what the state wants and what the oil

companies want what the OP and Aussies
want which I'll come back later on.

Let me go.

Then since since since this is
the global economic crisis.

Spearheaded by a stop some from some
prime crises and the Chinese and

overseas are really getting more moral and
vicious and who are a surgeon and

a two thousand I own.

For example and take a look at the number
two thousand I am Chinese overseas or

on an investment.

Pete around fifty billion dollars
that you are really taking a look now

at that number and all that in previous
investments in comparison with you.

And now so far the total investment
has already been about nine or

an hours and
then you take a look at the price.

The Chinese analyses
are painful the assets.

They're getting more and more aggressive
in terms of the premium the they like to

pay for example Chinese
analyses are the first among

the first companies to be awarded
to to operate in Iraq for example.

And then the other dimension of
the story is its banks in China and

of course we all know that China's foreign
exchange reserves are now are close

to three trillion dollars and therefore
exchange reserves are currently on a daily

basis and depending on the models
can be to be on dollars each day and

not much money the banks now are looking
for opportunities to spend that money and

then you know of course we used to
measure the government your knees.

You know increasingly scarce and the banks
are going to help the Chinese and

will cease to buy assets overseas and
that's that's how it happened in

the ninety's when the conceits turned to
the banks the banks turned them down but

now the banks have now only up and
you know in from their doors and

knocking on the door saying hey we have
money and look at the amount of bonus for

oil deals and
the Chinese banks have cut a.

Out for in our for this and
sees since since since last year and

by July two thousand I have
already signed onto for

over fifty billion dollars of our oil for
loans deals for example and

the Chinese oil and seas have been
more aggressive after that since

the recession and the Chinese government
is busy too and as the oil workers.

You know in part on this bull track for
oil.

The Chinese diplomats are folding
calling in their footsteps

in the hall the diplomats are everywhere
where the oil oil workers are I am just so

you know I dismount out of the simple
correlation here by buying

clothing on the police in the flats
on the way or the boy assets are in

office where the Chinese top
leaders have visited in Africa.

That's growing a lot of correlation
of course I don't assert that

Chinese leaders only go to places where
they are all although it's just a why why

an important dimension of China's foreign
diplomacy of foreign foreign policy but

there is this point
it's quite significant.

Correlation here.

I mean I go deeper into this because
all the diplomacy if you want to.

And then more importantly the kind this
government has made a lot of lust taps

to reduce the dependence on the street a
whole lot by building land based Mormons.

For example.

Now there are three wise in operation.

One is the conflict center.

I outline might be the best
one in the witch doctor and

then there's not many gas.

I for one example trying to
right now get twenty thousand

barrels a day from the kind of I want.

And we're not my point.

The third phase finishes China will get
four hundred thousand barrels a day

from now on and this pipeline the capacity
is six hundred thousand barrels a day.

And then China's doing scats and
oil pipeline from them are and

this pipeline would give China
another four hundred barrels a day

of imports from my opponents.

Well that my point is important
because if China more follow on land

based on finds the idea is trying doesn't
have to depend so much on the street.

I'm a lot and
take a look at that as this may all

this pipeline from the are all samples and
bypasses and bypasses.

That's the that's the whole idea.

And then all along the East Coast is
Chinese companies are accelerating L.G.

terminals and that's another
alternative uses to onto the hands

it's all this theory particularly gas
new security as supply and so for

short domestically and
then the military is

increasingly active about
oil secure as China depends

on foreign energy and
the military is taking a hard

look at what age can do to
protect China's all in for us.

You hear a lot about this the pearl
of string so to speak once

referred to which reforms of
the tenets of Chinese government and

Chinese companies to build the final
islands hospital wards in the South China

and in South Asia pops up with there's
a lot of our poor in Pakistan and

then there is a hammock mantle
caught have been told for

being caught and
then this memoir pipeline will

give Trying up the opposition
to build a deep water port city.

And of course this is half
moon on this occasion so

all because you can easily build
up a great listening post so

military you know surveillance operations
in those ports and so that's one concern.

And then there is another concern that
China is is monetize these Navy and

by building the first island chain in the
Staten Island chain as an attempt to do

break out of the control over the Pacific
Ocean by the United States and its allies.

But again these are just the you know
the perceptions and the outside of science

analysts have about the China's
efforts and let me let me tell you

what I think what China has been doing and
the state of China's and the security.

I think overall in comparison with
a couple years ago in comparison was two

thousand and five when Sunoco failed
to acquire Unocal in the U.S.

for example supply security in China
has has been slightly improved

the international market now is
more favorable to China's quest for

security because demand has declined
in North America and Europe.

You know prices have been pretty stable.

You know pretty that many don't actually
and China still pays a premium for

all our fault for Middle Eastern
crudes although my colleague

from the East West Center said recently
the Saudi Arabia has been adjusting that

myself for China to make sure Saudi Arabia
has a has a foothold in the Asian

markets will be interesting to see
the competition between Saudi Arabia and

Russia for the of the East Asian markets
and well the other thing is market

reforms are still incomplete in China and
governance that is very very weak why why

do I say that because you're off the
decentralization and reform the Chinese

government has literally abolished lined
the streets over the children Center and

the and all Cs now very very
powerful they are now the power for

economic affairs and map our political
entrepreneurs as well and it's not clear.

Oftentimes whether the and

all states will listen to the government
because the embassies are also partially

a listed on the post domestic
stock markets and international.

Stock markets.

So the wear two hats.

It's not clear.

You know in all of the science
scientists like to invoke this theory of

principle an agent and a principle that's
not necessarily have to we control over

the agents because there is the sense
that caught in between this operation

autonomy and the strategic autonomy
the strategically the knowledge and

the Chinese commerce you have
control over the losses but

operationally the analyses
are completely autonomous on.

The car to be encouraging story
is the BIOS the Chinese Elsie's

are increasingly co-operative with
the international aisle says for

example in the case of Angola
in case of Iraq and up.

Many other places for example cinema
just recently unfired unconventional gas

gas asset operated of by by by just
tested can be tested energy for

sample A My sense is that that will go
through and it will be the first time that

singlet attempts to acquire
assets in the U.S. I would be

really positive if that goes through
that indicates to the Chinese that here.

You're welcome to invest here.

Don't don't you know.

Don't go to those places such as Iran or
elsewhere etc.

But but the banks.

You know as a set of banks
are important too and

one of the core policy implications.

Well you know one of the foreign
policy implications.

Is that it's pretty troubling
actually if you think about this

the I.O.C. is the losses in China
have become really powerful.

But also economical and
a political issue and

it's not clear whether they pursue
their own interests all the.

The air they actually are abide by
what the state wants them to do and

at the same time what
the the aisles the Chinese L.C.S.

continue to expand overseas and
domestically.

THE GOVERNOR.

Structure in China is just not ready to
give you one example the National Energy

in the street only has one hundred
fourteen people when it was created.

How can one hundred fourteen people manage

an energy economy that's larger than
the US energy economy right now.

There we have over five thousand people
and in China at the federal level on

this issue of this conflict this clash of
beaches and foreign policy considerations

China certainly are attaching Potence
to this pursuit for pursuit of all for

you know for oil security but the same
time it's Chinese companies investments.

Oftentimes get China into.

A clash over or over in Iran over Burma or
over Sudan with the United States and

other countries and then there
is also this worry that the cost

of all energy security would trump China's
foreign policy interests with regard to

territorial disputes in evils in India
with China's in the East China Sea and

in South China Sea and our prayers
alluding to the spat between China and

Japan over the East China Sea And
that's you know the same thing

right now in the South China Sea The
tension is growing that that means for

example and
the Chinese have in this in a way

you know the have all I think now.

Become more hardened on their
positions over the South China Sea and

the vet I mean he's aligned
themselves with the US and

THEM by helping their positions that that
means I encourage the American companies

to develop means developing oil and
gas in South China Sea or

we can get into you know offshore
security issues and then finally

in that in an attempt to to China's
strand or security and the Chinese

navy is modernizing at that pace that
has not been seen for quite a while.

And this unprecedented and then at some of
the pace of naval modernization in China

is Vora something for many many countries
countries in Southeast Asia and

countries in this and
then this country as well.

And so to what extent can
the Chinese government align.

It's.

Interests to expand its navy and
interests to arm to arm

security on its oil imports that still
is issue and to whether China can

can maintain a harmony between the two
impulses of the two two important nice.

Is still a challenge and
has a lot ramifications for this country.

So I think that's why
there's there's a you know.

There's a lot of need for for
us to care about energy security and

try it out and that's why on that front.

I applaud the South the South Korean
government for taking the lead

in forging on the regional energy security
cooperation but I have to say that so

far I have been I've been I have
not been encouraged by this attempt

because most of efforts are still
focused on bilateral trilateral or

do lateral and there is still no
regional cooperation but to that.

And we will all work together and
hopefully at some point it will have

more regional security cooperation and
that's something I'm working on right now.

Thank you.

Thank you.