China’s energy demand to provide more export opportunities for Australia

Jun 21, 2004 02:00 AM

Rapidly growing energy consumption in China is likely to provide increased export opportunities for Australia's energy industry, said the government's Australian Bureau of Agriculture & Resource Economics (ABARE) in a report. ABARE highlighted the planned expansion of natural gas usage in China's strained energy mix, which is currently dominated by coal and to a lesser extent oil.
"While consumption of gas remains a minor proportion of energy consumption, at less than 4 % in 2001, it is expected to grow more rapidly than other fuels over the next decade and beyond," ABARE said.

The agency said strong growth in China's economic output, especially in industrial production, led to a significant increase in the country's total primary energy consumption in 2003. It said coal's share of fuel mix in China will remain dominant, but is slowly declining amid coal shortages. In 2001, coal accounted for 69 % of total primary energy consumption compared with 80 % in 1990.
"Under the pressure of strong economic growth, the energy demand-supply balance has become strained in China and the energy outlook is challenging," the agency said. "Even if economic growth slows to the government's target rate of 7 %-8 %, significant investment will be required to meet energy demand growth, not only in the electricity industry but in the coal and gas sectors as well."

It noted natural gas has increased in significance in China's short and long-term energy planning and is now the focus of accelerated investment in exploration, production, transmission and LNG imports.
ABARE said all of China's gas consumption was met from domestic sources in 2003, but noted the country's commitment to import LNG. China, the world's second-largest consumer of primary energy after the US, approved the construction of the country's first LNG receiving terminal in Guangdong province in 2001. The following year, Australia's North West Shelf project won a contract to supply about 3.3 mm tpy of LNG to the terminal for 25 years from mid-2006.

The North West Shelf Project is operated by Woodside Petroleum.
"China's growing demand for LNG will be one of the key factors that drives expansion in global liquefaction capacity and price trends in the LNG market," ABARE said.
Noting that China's electricity sector is dominated by coal-fired generation, ABARE said the country's electricity consumption is forecast to increase 11 % in 2004.
"Current plans are that coal will remain the dominant fuel in the power system but increases in natural gas, hydro and nuclear capacity will also be important," ABARE said.

The agency also noted that rising demand for oil, particularly in the transport sector, may provide opportunities for importers of the commodity.
"Given the limited forecast increases in oil production, it is likely that China's oil import dependence will continue to rise over the medium to longer term."
It estimated that net oil imports may exceed 5 mm bpd by 2015 compared with 1.9 mm bpd in 2003.
Other major companies listed in the energy sector on the Australian Stock Exchange include Santos, Origin Energy and Caltex Australia.

Source: Dow Jones
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