China should take advantage of relatively low coal prices and import more to satisfy electricity demand in its most populous provinces, instead of relying on domestic coal, which is expensive to transport, according to a Chinese government report unveiled in the US on Tuesday.
China currently produces much of its coal from its northwest provinces and ships it by rail to populous provinces along the east coast, tying up rail and highway capacity, said Yang Yufeng, a senior researcher at China's Energy Research Institute, which published the report.
Meanwhile, coal prices in the Asia-Pacific region are low, due to lower demand and slowing economies. China's energy demand is projected to grow 4.7% annually to 2015, 2% less than its growth rate from 2006 to 2011, according to the report, Yang said.
"China should increase imports [of coal] to balance supply and demand of the east and west, so as to reduce pressures on transportation and to protect the environment," Yang said in a presentation at the Center for Strategic and International Studies in Washington. "The coal market is not very tight in the Asia-Pacific, so the price is very good."
He added that coal gasification and liquefaction projects are too expensive at the moment, and that China's coal companies project a 100-year domestic supply -- a prediction with which he personally disagrees.
"They say there is no problem [with domestic supply], but I, myself, think this is a mistake," he said. "The resources are more and more limited, and the environmental [concerns] are serious."
The recommendation is included in the 715-page China Energy Outlook, which was published in Chinese late last year and aims to project domestic and global energy trends through 2015.
Yang said this is the first time China has published such a report using its own studies and analyses, instead of relying on projections from the International Energy Agency and the US Energy Information Administration, and said an English translation will be available in a few months.
The report dovetails with China's recent release of its five-year energy plan, in which the country pledged to cut its energy intensity by 16% by 2015, including reducing the share of coal consumption and boosting gas use.
The China Energy Outlook projects that China's consumption of coal will be as high as 3.8 billion mt/year, representing 63% of the country's total energy consumption.
Among the other conclusions in the outlook is that oil consumption will grow by 4% annually to 530 million mt in 2015, fueled by a rapid expansion in private car ownership.
Imports are forecast to reach 320 million mt by 2015, up 41% from 2010 levels. At the same time, decreased output from oil fields will be roughly offset by increased output of new oil fields, keeping total domestic crude production around 200 million mt.
Natural gas consumption in China will reach 229 Bcm/year in 2015, an average annual growth rate of 18.5%, due to increased urbanization and increased use for power generation. As a result, China's demand for LNG imports will soar, with the country currently lacking infrastructure to develop much of its own reserves.
"The problem is, for China, the gas infrastructure is not very large scale," Yang said. "Gas has to compete with coal, especially in power generation. Any gas project needs to be very large scale, so we must find power generation to support the whole [gas development] project."
Populous provinces along the east coast have a higher standard of living and can better afford to invest in those projects, given the high costs of LNG imports relative to coal, he added.
"China needs to accelerate the development of the natural gas market, to give permission to the regions that can afford high gas prices to consume more natural gas and to approve certain gas-fired power generation facilities," an executive summary of the China Energy Outlook stated.
