Securing energy supply and more in Africa. The involvement, activities, and
policy of China in Nigeria.
Master thesis Political Science Specialization International Relations
Author: Derk de Haan Student number: 10085216 Supervisor: Dr. M.P. Amineh Second Reader: Dr. M.O. Eze Date of submission: 21-06-2019 Place of Submission: Amsterdam
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Table of content
Acknowledgments ... 5
Abstract ... 7
Maps ... 8
List of Tables, figures and maps ... 11
Abbreviations ... 13
1: Research Design ... 15
1.1 Introduction ... 15
1.2 Social and academic relevance ... 17
1.3 Research question ... 17
1.4 Literature Review ... 18
1.5 Delineation of the Research ... 22
1.6 Theoretical framework ... 22
1.7 Hypotheses ... 26
1.8 Sources and Data Collection ... 27
1.9 The organization of the Thesis ... 28
2: The Chinese energy situation and related policy ... 29
2.1 Introduction ... 29
2.2 China’s energy situation 2006-2017 ... 30
2.2.1 China’s energy mix ... 31
2.2.2 China’s proven reserves ... 32
2.2.3 China’s Energy Production ... 34
2.2.4 China’s energy consumption ... 36
2.2.5 China’s sectoral energy consumption ... 37
2.2.6 China’s energy imports ... 38
2.3 China’s domestic and foreign policy: energy and infrastructure ... 40
2.3.1 The 13th Five-Year Plan and its objectives ... 40
2.3.2 Chinese National Oil Companies ... 42
2.3.3 ‘Going out’ in Africa ... 43
2.3.4 China, Africa, and the Belt and Road Initiative ... 45
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3: Africa’s China. Nigeria and its importance in Africa ... 51
3.1 Introduction ... 51
3.2 Nigeria compared in data ... 52
3.3 Nigeria’s regional and international cooperation ... 56
3.3.1 Economic Community of Western African States (ECOWAS) ... 57
3.3.2 Forum on China Africa Cooperation (FOCAC) ... 58
3.3 Conclusion ... 66
4: China’s Economic (investment, finance, and energy) policy in Nigeria ... 69
4.1 Introduction ... 69
4.2 China economic policy in Nigeria ... 70
4.2.1 China’s policy tools ... 71
4.2.2. China’s policy outcomes ... 74
4.3 Conclusion ... 81
5: China, Nigeria and the transition of power ... 83
5.1 Introduction ... 83
5.2 The Geopolitical Belt and Road ... 84
5.3 A new, Chinese-led order? ... 86
5.4 The effects of the rise of China in Nigeria and Africa ... 92
5.5 Conclusion ... 97
6: Conclusion ... 99
Bibliography ... 104
Journals ... 104
Books and Book chapters ... 107
Reports ... 108
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Acknowledgments
This thesis has been the last product of my seventh and, hopefully, the final year of my academic education. It all began in 2012, studying History at the University of Utrecht. I’ve lived in Utrecht the entirety of my student years and it has become my second home city. The four and a half years that I studied History were not the easiest education-wise but I can say that I thoroughly enjoyed learning about my favorite historical periods. How much fun I had during those courses, how much misery I experienced in writing the bachelor thesis. As my parents will remember, it was not the smallest of tasks for me to complete the Bachelor thesis. After two failed attempts, third time was the charm. This ordeal made it clear to me that historic research wasn’t really my cup of tea so for my master, I decided to switch to Political Science in Amsterdam.
In order to be accepted into the master, I first had to complete the pre-master. For me, it was the ideal way to break myself into the subject of Political Science. Also, I could get used to the constant train and metro ride from Utrecht to Roeterseiland and back. During my pre-master, I first came into contact with energy-related research. I would like to thank Mr. Rezaeiejan for introducing me to the Belt and Road Initiative, the subject that would later on become my favorite in International Relations. After the successful completion of the pre-master, it was time for the actual master. I learned a lot during this year but my favorite subjects of the year were the courses taught by Dr. M.P. Amineh. First during the electives and thereafter as supervisor of my thesis group, Dr. Amineh enthusiastically educated me and my fellow students in the art of energy studies and all of its concepts and theories. I would like to especially thank Dr. Amineh for all his guidance, his patience with me in the thesis and in delayed trains, his jokes and above all, his specific catch phrases that I will also connect with him. Dr. Amineh was part and parcel of my experiencing during the master International Relations.
Concluding, I want to thank some people personally. First, my parents for supporting and believing in me all these seven years. Let’s hope it’s a hole in once this time. Second, my roommate Tom for sacrificing the living room for my studying the last couple of months.
Derk de Haan
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Abstract
This thesis will provide a comprehensive analysis of the involvement and investment of China in Nigeria between 2006 and 2018. It will entail an analysis of the importance and role of Nigeria in China’s policy and goals related to energy security, economy, international politics, and foreign strategy. This will be done by using the framework of Geopolitical Economy and Power Cycle Theory. In this framework, it will be claimed that China’s economic growth can only be sustained by increased energy import which causes China to look abroad for its energy needs. To enhance energy supply security, China will enhance economic and political relations with resource-rich countries like Nigeria. Nigeria will be analyzed in data in the context of China’s energy security strategy, Belt and Road Initiative, and foreign policy. This in order to understand what the role and the importance of Nigeria is in China’s energy related and foreign policy. An in-depth analysis of the Sino-Nigerian and Sino-African political and economic relations will be provided in order to connect state and market in China’s foreign policy. By using Power Cycle Theory, an overview of the relative power distribution will demonstrate that the dominant position of the US is declining while China and India are rising. It will conclude with an analysis of what this transition in power means for Nigeria and Africa.
Keywords: China, Energy Supply Security, Nigeria, Sino-Nigerian relations, Geopolitical
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Maps
Map 1: China
9 Map 2: Nigeria
10 Map 3: Economic Community of Western African States (ECOWAS)
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List of Tables, figures and maps
Tables
Table 2.1: China’s proven reserves by resource ... 33
Table 2.2: China’s reserves in comparison with the US and World ... 34
Table 2.3: Energy production China 2006-2017 ... 35
Table 2.4: Total energy consumption per resource in China in Mtoe ... 36
Table 2.5: Energy consumption per sector in China in 10.000 tonnes of coal equivalent ... 38
Table 2.6: China total energy import by resource ... 39
Table 3.1: Economic and Demographic Data Nigeria, Algeria and Egypt in 2017 ... 54
Table 3.2: Energy data Nigeria, Algeria, Egypt and the World 2017 ... 55
Table 3.3: Nigeria oil revenue in percentage of export, state revenue and GDP in 2017 ... 56
Table 4.1: Chinese investment and construction per sector in Nigeria 2006-2018 in million US$ and percentage of total ... 74
Table 4.2: Chinese investment and construction in the Nigerian Energy Sector by year and company in million US$ ... 75
Table 4.3: Chinese investment and construction in the Nigerian Transport Sector by year and company in million US$ ... 78
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Figures
Figure 2.1: Chinese energy consumption mix 2006-2017 ... 31
Figure 2.2: Energy consumption per sector 2000-2016 ... 37
Figure 3.1: Power of Africa’s five regions in the percentage of global power 1990-2040. ... 53
Figure 4.1: The Infrastructure for Resource Model (IRM) ... 72
Figure 5.1: Relative percentage of GDP 1990-2017 ... 87
Figure 5.2: Relative percentage of military expenditure between 1990-2017 ... 89
Figure 5.3: Relative percentage of population 1990-2017 ... 90
Figure 5.4: Relative total power percentage 1990-2017. ... 91
Figure 5.5: Chinese exports to and imports from Africa 2006-2018 ... 94
Figure 5.6: Chinese exports to and imports from Nigeria 2006-2018 ... 94
Maps Map 4.1: Railway development in Nigeria ... 80
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Abbreviations
AKK Ajoakuta-Kaduna-Kano
AU African Union
b/d Barrels per day
BRICS Brazil, Russia, India, China, South Africa BP British Petroleum
CADF China-Africa Development Fund CDB China Development Bank
CCECC China Civil Engineering Construction Corporation CMB China Merchant Bank
CNOC Chinese National Oil Company
CNOOC China National Offshore Oil Company CMEC China Machinery Engineering Corporation CNPC China National Petroleum Corporation CPC Communist Party of China
CRCC China Railway Construction Corporation CSC Chinese State Class
Cu. M. Cubic Meters
ECOWAS Economic Community of Western African States EPC Equipment, Procurement and Construction
EU European Union
EXIM Export-Import
FDI Foreign Direct Investment FGN Federal Government Nigeria
FOCAC Forum on China-Africa Cooperation FYP Five-Year Plan
GCIT Global China Investment Tracker GDP Gross Domestic Product
HHMI Hillebrand-Herman-Moyer Index IEA International Energy Agency
14 IOC International Oil Companies
IPE International Political Economy IR International Relations
IRM Infrastructure for Resource Model
LEAP Long-range Energy Alternatives Planning LDC Least Developed Countries
LNG Liquid Natural Gas
NIEO New International Economic Order NNPC Nigerian National Petroleum Corporation NOC National Oil Companies
MOFCOM Ministry of Commerce
MoU Memorandum of Understanding MPI Ministry of Petroleum Industry Mtoe Million tons of oil equivalent OAU Organizations of African Unity OBOR One Belt, One Road
OML Oil Mining License
OPEC Organization of Petroleum Exporting Countries PCT Power Cycle Theory
PPP Purchasing Power Parity REC Regional Economic Community
RMB Renminbi
SGR Standard-Gauge Rail
Sinomach China National Machinery Industry Corporation Sinopec China Chemical and Petroleum Corporation SOE State-Owned Enterprises
SSC South-South Cooperation TPP Trans-Pacific Partnership
UN United Nations
UNPKO United Nations Peacekeeping Operations
US United States
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Chapter 1: Research Design
1.1 Introduction
In the last two decades, China has grown into one of the important economic and political actors of the world. Especially the Chinese economy has seen unprecedented growth in recent times. This economic growth, among other things, causes a rise in demand for energy. China is not able to meet this growing demand with domestic supply and reserves and therefore looks to foreign countries to provide the missing supply of energy (Zhang et al. 2017: 638-640). China is trying to enhance its energy supply security by cooperating with other
countries. Energy supply security consists of three main factors: reliability, affordability and environmental sustainability. Energy is a key factor for China to sustain its economic growth and development (Cao and Bluth 2012: 382-383). With large investments in foreign energy and energy-related projects, China is trying to enlarge the energy production in foreign countries and securing the import routes to China. To diversify its energy suppliers, China is increasing its investments in resource-rich regions. African countries are often the
destinations of these investments. Nigeria is an African, resource-rich countries that holds a strong economic and political relationship with China. Since 1971, China and Nigeria have had a diplomatic relationship on trade and now, with Chinese demand for oil growing and Nigeria’s large reserve of oil, the Sino-Nigerian relations are becoming stronger (Odeh 2014: 150-153).
The largest current investment project of China is the ‘Belt and Road Initiative’ (BRI), previously known as the ‘One Belt, One Road’ (OBOR) initiative. Implemented in 2013, the BRI is a project which links countries in Europe, Africa, and Asia through bilateral
agreements and treaties with China (Hu et al. 2017: 409). The BRI is the largest Chinese Foreign Direct Investment (FDI) project so far. It’s mainly based on infrastructure and includes six economic land routes and one maritime route (Hu et al. 2017: 409). The land routes consist of the modern equivalent of the historic Silk Road and five economic corridors. These economic corridors are being built in economically strategic areas (Cai 2017: 10-12). Nigeria formally joined the BRI in 2019. Nigeria is Sub Saharan Africa’s largest economy and relies heavily on oil as its main source of foreign exchange earnings and government
16 revenues. Nigeria has an oil production of 1.946 million barrels per day (13th of the world)
and the 6th largest proven reserves of oil of a total of 37.45 billion barrels (Worldbank 2018).
China is not only interested in Nigeria because of its energy resources. Alongside its massive oil production and reserves, Nigeria has the fastest growing population and economy of the African continent and Nigeria is an important political actor in the regional and
international political field in Africa. In the following thesis, I want to research the
importance and the role of Nigeria in China’s foreign and energy supply security policy. To achieve this, I have the following objectives:
1) Present an analysis of the Chinese energy situation by providing an overview of the Chinese energy consumption per sector, energy production, energy reserves, and energy imports. Determine and analyze the main Chinese actors and Chinese policies that are attached to energy and energy supply security. Place the energy-related policies and actors in the Belt and Road Initiative.
2) Present the energy, economic and demographic related data of Nigeria in comparison with other African countries. Analyze the importance and role of Nigeria in the regional and international political field in Africa with a focus on cooperation with China.
3) Present an analysis of the bilateral relationship between Nigeria and China since 2006 with the focus on the transport and energy sector. Assessment of the Chinese energy, economic (investment and finance), and strategic policy in Nigeria.
Connect China’s investments and construction projects in Nigeria with the BRI and strategic goals of China.
4) Research what the furthering of China’s economic, political, energy and strategic policies mean for the global distribution of power. To analyze how this affects Nigeria and Africa.
The main unit of analysis in this thesis will be China. The research revolves around how China is trying to enhance its economic, political, strategic and energy-related policy through cooperation with Nigeria. It will go into the behavior of China in Nigeria and the African continent. The focus will lie on what China is trying to achieve in Nigeria and Africa as a whole. The Chinese interest goes further than the economy and energy. It is the aim of this thesis to understand and analyze the reasons of China behind furthering the relations with Nigeria.
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1.2 Social and academic relevance
The societal relevance of the thesis is the impact that increased Chinese involvement has on a country. Nigeria has the largest population of Africa and the seventh largest in the world. More than 203 million people live in Nigeria, with more than 250 ethnic groups and 500 languages. Nigeria’s sustained high population growth rate will continue for the foreseeable future because of population momentum and its high birth rate. Economic
diversification and growth have not translated into a significant decline in poverty levels: over sixty-two percent of Nigeria's population live in extreme poverty. Despite its strong
fundamentals, oil-rich Nigeria has been hobbled by lack of infrastructure, restrictive trade policies, an inconsistent regulatory environment, insecurity, and pervasive corruption. Nigeria is not the only country that faces these challenges while receiving Chinese funds through the BRI. This thesis will present an analysis of what the enhanced cooperation with China means for developing and resource-rich countries.
The academic relevance of this research is that it will add to the knowledge about BRI and China’s motivations behind the investments in Nigeria and Africa. It is important to research how China is expanding its BRI into more and more countries in the world. Since Nigeria only recently joined the BRI, this thesis will add to existing research about the BRI in Africa and will present an analysis of the Chinese motivations behind the incorporation of Nigeria into the BRI. Adding to this, the BRI only started in 2013 so it is a new initiative. To better understand the BRI and its effects, different case studies need to be undertaken to get a full overview of the effects of the BRI. This thesis will add to this knowledge by describing the developments in Sino-Nigerian relations prior to the incorporation in the BRI. It will present an analysis of how these relations are shaped to fit the format of China’s BRI. The BRI is not limited to Nigeria or Africa, it is the largest FDI project of China and includes bilateral agreements with countries in Africa, Europe, and Asia. It is important to understand and research the Chinese policies and agreements that flow from the bilateral relations with the different countries under the umbrella of the BRI.
1.3 Research question
By reaching these objectives, I will provide an answer to the following research question: What is the role and importance of Nigeria in China’s foreign policy, energy supply security, economic, and security strategy?
18 The objectives and the research question cover multiple sectors and fields of analysis. Therefore, to reach the objectives and answer the research question, the research question will be divided into several sub-questions. The sub-questions are as followed:
1) What is the current energy situation and policy of China concerning sectoral consumption and supply security?
2) Which policies is China implementing to further its energy, economic, security and political situation?
3) How does Nigeria compare to other growing African states in energy, demographic and economic field?
4) What are the political, economic and security relations between China and Nigeria and how do they cooperate?
5) Which investment and construction projects flowed from the Sino-Nigerian relations and which sectors are the focus?
6) Is China’s share rising in the distribution of power in the international political order and how does this affect Nigeria and Africa?
Each chapter will answer one or several of these research question. This research is to add to the already scientific research revolving these subjects. To get a better grip about the thesis, a short overview of previously produced research will be presented.
1.4 Literature Review
Nigeria’s oil production and reserves make Nigeria a potentially important energy partner for China. China’s increased interest in Nigeria has several aspects to it. It adds energy supply security but has strategic, economic, and political goals as well. The enhanced Sino-Nigerian relations fit in the greater picture of China’s foreign policy. Chinese involvement in the African continent is increasing. Several scholars have researched different subjects within China’s relations with Africa and Nigeria. In the following section, I will review several scholars who have researched different subjects within these relations. The focus will lie on China’s energy situation, China-Africa relations and the political structure of Nigeria related to oil.
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China’s energy situation
According to Scissors, China's energy sector has five main features today. 1) Inadequate local resources 2) energy consumption growth, although slower growth than previous years 3) High dependence on coal 4) Increasing dependence on imported energy 5) heavy spending in the energy sector, primarily of renewable or non-fossil fuels. In 2013, roughly two-thirds of the energy consumption was accounted for by coal. Oil has an eighteen percent share of the energy mix and gas has a six percent share (2015:28). In recent years China has been focusing more on renewable energy and decreasing its fossil fuel share in the energy mix. Total consumption is rising in China, but the share of coal is decreasing, and oil is increasing. Since oil is scarce in the world and only found areas in the world, China will have to compete with other major economic powers, like the United States (US) and European Union (EU), for the resources (Ibidem: 28-29). Nigeria can, therefore, play an important role in China’s oil security.
Dong et al. review the Chinese energy consumption structure and make an outlook based on the Long-range Energy Alternatives Planning (LEAP) model, a scenario-based energy environment modeling tool for energy policy analysis and tracking of energy
consumption, production and resource extraction in all sectors (2017: 219). In the analysis of the results from the three scenarios in the LEAP model, Dong et al. determine three policy implications for China. First, it will be necessary to incorporate adjustments in the structure of energy consumption into the industrialization process. Currently, the focus lies too much on the production of energy. Adjustment of the energy consumption structure is imperative in the long-term perspective. Second, it is critical for the Chinese to establish and perfect energy consumption related policy. Dong et al. see this as the most important measure since China has been lacking aggressive energy efficiency policies and policy actions. Third, more focus should go out to the development of clean fuels and energy reduction in the Industry Sector, since this is the biggest consumer of energy (Ibidem: 226).
Sino-African Relations
The African market has a large potential for Chinese economic needs. The increased interest and influence of China in Africa is seen by Etyang and Panyako as China furthering its economic and geopolitical goals. Etyang and Panyako name three factors for economic interest. First, the macroeconomic situation in Africa is taking a favorable turn. Chinese products are believed to have great potential for selling on the African market. Third, China is
20 trying to secure access to the abundant natural resources of the African continent, especially crude oil. The geopolitical goal of China in Africa is positioning itself as a new hegemon in the international political field, surpassing the United States as the main political actor. In this process, influence in Africa will be needed. Chinese presences in Africa is not only economic but military and peacebuilding as well (2016: 1-6). Hanauer and Morris claim that the
increased interest and influence of China in Africa has mixed outcomes. The major investments provide the much-needed infrastructure, created jobs and caused economic growth in previously abandoned sectors. Living standards and economic opportunities have increased through Chinese investments in education, training, and economic development. But Chinese support and investments also kept several non-democratic leaders in power. The focus on the extracting of natural resources in the Sino-African relation is enforcing the dependence on natural resource and unskilled labor of many African countries. The structure of the Chinese investments deals causes a high level of debts, often entail unviable economic decisions and increase corruption with African officials (2014:45).
Nigerian Oil Politics and Sector
Babalola states that to understand the political economy of Nigeria, one must accept that oil is central to this political economy. Therefore, it is logical to follow the ‘rentier' theory when studying Nigeria. Rentier theory has its foundation in the over-dependence of a state on revenues of natural resources. Rent as a concept is therefore determined as royalties paid on natural resources. In the case of Nigeria, this approach analyses the effects of oil rents on the Nigerian economy. The rentier, or owner of the natural resources, is the individual or state that lives on the income from the natural resources. Nigeria is a rentier state, which is defined as a country that receives substantial amounts of external rents on a regular basis. In this definition, the oil rents are paid by foreign actors. Rentier states are therefore freed from the need of raising income domestically, like taxes, and are financed through externally generated revenues. This over-dependence on oil makes Nigeria susceptible to the so-called Resource Curse (2018: 62-68.)
Idemudia sees the resource curse, or paradox of plenty, as the correlation between the possession of natural resources in a country and the negative political, economic and social effects this possession entails. Countries with a resource curse are often consequences of governance failure in the management of natural resources. International policy for alleviating the resource curse is therefore focused on addressing aspects of governance failure. (2009: 4).
21 Kelley defines three parts of the resource curse: Dutch disease, vulnerability for fluctuations in primary resource prices and, negative political and institutional effects. Dutch disease refers to the excessive export of Dutch gas that caused the Dutch currency to greatly rise compared to other currencies, making the other export products uncompetitive. Done in moderation, the export of natural resources can boost economic development through foreign currencies reserves but done in the extreme, it will devalue domestic goods and will destroy the export market. (2012: 36-37). Sayne and Hruby state that Nigeria has not been able to acquire sufficient fiscal buffers to cope with the downturn in oil prices since 2014. The country's reserves are depleted after a period of heavy government spending and wide-spread corruption in the public sector. The current state of the Nigerian energy sector, with oil to sell and government debts, offers a good trading position for China and its National Oil
Companies (2016: 2-5).
According to Idemudia, is the Nigerian oil industry in the hands of two of its three main stakeholders: The Federal Government of Nigeria (FGN) and International Oil
Companies (IOC). The FGN is the only authority which can enter negotiation and is the entity that grants permits for oil exploration to local and international oil companies. The FGN plays the dual role of stock and stakeholder in the Nigerian oil sector. Its national oil company, the Nigerian National Petroleum Corporation (NNPC), is the body that enters the oil sector as an actor. The NNPC regulates the activities of the different oil companies in Nigeria and takes on the role of supervisor of the sector. It dictates the pace and direction of the industry. Oil exploration and marketing takes place through joint venture partnerships and product sharing contracts between oil companies and the FGN through the NNPC. The NNPC holds an
average of fifty-seven percent of the shares in these joint ventures. The second group of major stakeholders is dominated by IOCs. In this private actor group, there is a division between the first- and second-generation oil companies. The first-generation companies have been able to maintain their dominance through a ‘first mover’ advantage. Second generation companies are confined to extract their oil from regions that are not used by the first generation or from newly discovered oil fields (2009:5-7).
Gap in literature
The review of the existing literature on different subjects with Sino-Nigerian relations shows that China must change its current energy situation to sustain its economic and political development. The gap in the reviewed literature is the link between China’s energy situation,
22 Sino-African relations, and Nigerian oil. By providing in-depth research on how China is cooperating with Nigeria, and how China is furthering its energy supply security by doing so, the link will be made. The abundance of natural resources, the economic prospects, and the favorable political environment make Africa a key region for Chinese development. Nigeria is one of the larger African states with huge potential for China. The resource curse has made Nigeria very poor in infrastructure and developed industry which China can offer in exchange for the much-needed oil. The political situation in Nigeria gives China an easy cooperation partner through the centralized political system. The investments and projects will receive fewer impediments in a centralized political system in comparison to a liberal political system. All this combined cause China to heavily invest in Nigeria and Africa.
1.5 Delineation of the Research
For this research, I chose the timeframe 2006 until 2018. I chose the start year 2006 because, in 2006, China National Offshore Oil Company (CNOOC) acquired its first Oil Mining License (OML) in Nigeria, OML 130. CNOOC acquired a forty-five percent stake in this OML and is planning to increase its investment with 3 billion in the coming years. CNOOC has already invested 14 billion in this OLM. I choose the end date of 2018 because data of 2019 will not be completed during the duration of this research. Considering this, I chose 2018 as the end year since the data is produced of this year.
1.6 Theoretical framework
In this thesis, two theoretical frameworks will be applied: Geopolitical economy and Power Cycle Theory (PCT). Geopolitical economy is a recent strand of political theory which builds upon elements of International Political Economy (IPE) and International Relations (IR), especially geopolitics. Cherp and Jewell (2011) state that after the Cold War, there was a change in global security. The bipolar world system of capitalism vs communism was
replaced by a world system characterized by international terrorism, instability in oil-rich Arabic, African, Asian and former Soviet Union states, and the changing role of China. These international security developments are reflected in the complex web of alliances based on energy and security. Securing a sufficient supply of oil and other natural resources for defense
23 and the transport sector have remained the focus of the energy security agenda. In studying energy security, Cherp and Jewell point out two schools of thought. The first school is the older geopolitics which focusses power balances, and control over energy resources and assists based on military, political or civilizational alliances. The second school focusses on institutions of global governance as well as non-state actors and arrangements. It diverts from the more traditional focus on the balance of power between various national actors and incorporates social science and globalization theories in its analysis (2011: 204). Geopolitical economy unites these two school into one strand of scientific thought.
Geopolitical economy is inspired by two concepts put forward by David Harvey in 1985: the territorial logic of power and the capitalist logic of power. Geopolitical economy has been labeled as the interaction between these two concepts. The logics apply to the engagement of major state-actors in cross border activities. The territorial logic of power in this context is geopolitical where the capitalist logic is geo-economics. Territorial logic is political and military power within a state and between states. Capitalist logic is wealth creation and accumulation of capital without boundaries as well as flows of capital. The logics can be found in realism (territorial logic) or (neo)liberalism (capitalist logic). Geopolitical Economy states that both logics are interrelated and are relatively inseparable. Geo-economics influence geopolitics and vice versa and are therefore interdependent. Amineh and Guang (2018) label the interaction between these two logics as Geopolitical Economy. This interaction sets the context of the current state of the global capitalist system. The current capitalist system has an expansionist logic. Capital requires endless growth and capital accumulation. This has the effect that a state, in this case, China, want to increase its wealth-power structure. Wealth refers to geoeconomic logic and power to geopolitical logic. This increase in wealth-power leads to domestic resource scarcity. This causes state and market actors to look abroad to acquire an increase in wealth-power. Energy and energy security plays a vital role in geopolitical economy since it’s not only a part of the economy but a requirement for the whole economy and are therefore an important geopolitical dilemma (2018: 25-26). To better understand the interaction between state and market and energy security, geopolitical
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State-Society-Complex
State-society-complex refers to the state-made institutions that regulate and connect national and foreign markets. On the national level, the relation between state and markets are a part of the institutions connected with promoting or restraining growth. On the international level, the state made institutions reflect the hegemonic state’s ability to create rules and order. The current global system is defined by the conflict between states over the rules of the current system and the transition of power in the global wealth-power structure. Scholars define two ideal types of state-society-complex. The distinction is made between liberal and centralized state-society-complex. Liberal state-society-complexes can be found in democratic states where the state is kept in check by market-related civil society. Centralized
state-society-complexes can be found in the so-called contender states, major states that challenge the hegemonic liberal states. Within the centralized state-society-complex, there is a relative differentiation between the ruling and the governing bodies. The business class, who are independent in a liberal state, are part of state power in the centralized version. Key economic sectors are still nationalized and the business class is directly or indirectly controlled by the state. The business class is therefore not able to become fully independent. In a liberal state-society complex, the business sectors influence the policy-making process by providing input. In this, the business sector has a dominant influence that is formed independently of the state. In a centralized system, the state class is able to push through its own agenda without being influenced by the demands of civil society groups like the business sector. The government determines the long-term orientation of society. China, as the best example of the centered version, makes use of the market as a political tool and deploys it to spur the international influence of China in the economic and political field (Ibidem: 11-12).
Energy security
Yergin defines energy security as the availability of sufficient supplies of energy at a reasonable and affordable price. Energy security is essential for states. Meeting the demand for energy to sustain the economic growth and development has become an important part of the policy. For developing and emerging countries like China and India, energy security lies in adapting their economies on the dependence of the global market. Developing countries are concerned about how price fluctuations affect their balance of payments. Countries like China and India have to adjust from a commitment of self-sufficiency to a more open and fluctuating global system (2006: 70-71).
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Resource scarcity
The biggest threat to energy security is the scarcity of resources. Resource scarcity can be separated into three types of scarcity. The first type, demand-induced scarcity, is caused by three factors and refers to growing demand which cannot be met by the supply of energy. First, population growth in consuming countries. Second, rising income per capita in
advanced and late industrialized countries. Of the latter country type, China and India are the main actors and represent a large majority of the world population. Third, the price of
substitutes of natural resources. The second and third type of scarcity refers to the supply side of the energy market. The second type is supply-induced scarcity and refers to costs that are made during extracting, refining and selling the natural resources or energy. The market function of supply and demand causes linkages between the first and second type of scarcity. The third type of resource scarcity is structural scarcity. The final type is not part of the market mechanism of supply and demand. Structural scarcity is on the supply side of energy but is induced by deliberate action by major actors in the energy sector. Examples of these types of actors are producer-cartels like the Organization of Petroleum Exporting Countries (OPEC) and strong National Oil Companies (NOC) in resource-rich countries (Amineh and Guang 2018: 15-16).
In addition to Geopolitical Economy, I will use Power Cycle Theory (PCT) in the analysis of Sino-Nigerian relations. As is mentioned in the explanation of the concept State-society-complex, the current global system is defined by the conflict between states and the transition of power in the global wealth-power structure. To analyze this transition and China’s position in the system, I will use PCT to compare China relative to other major states. Doran (2003) has a theoretical framework to measure the relative power position of a state. Doran states that power is cyclical and to understand power is to understand the limits and issues that come along with it. Changing structures in the international system create opportunities and impediments for statecraft. Therefore, to understand the cycle of power, the structural (state and system) and the behavioral (power and statecraft) aspects of world politics must be united. Doran calls this Power Cycle Theory (PCT) which explains the evolution of the systemic structure and the following concerns for statecraft through the cyclical dynamic of the relative rise and decline of states. The expectations and concerns of states regarding security and foreign policy are linked to the power cycle of states. Relative growth of the power of states that are coined as competition or contenders will cause absolute dominant
26 states to alter their policy to adjust to this growth. PCT is therefore essential to understand the shifting dynamics in world politics (2003: 13-14).
Central to the PCT are the principles of the single dynamic. PCT reveals a new perspective of statecraft in the expectations of relative power change. This in contrast to the perspective of absolute trends, which show only absolute growth and offers no perspective on the relative growth rate. The single dynamic of PCT shows the absolute growth rates of a state compared to the absolute growth rate of the system or systemic norm. Two principles underlie this single dynamic. First, a state’s systemic share increases when the state’s absolute growth rate is higher than the systemic norm of growth. With this, a single state growing faster will initiate a momentum of change on state power cycles in the system. Second, a state relative power growth will accelerate only for a certain amount of time and eventually will start a process of deceleration due to the bounds of the system. Even in the case of the difference in absolute growth remain unchanged, a state’s power is bound to decelerate (Ibidem: 21-22).
1.7 Hypotheses
Based on the research question, sub-questions and the theoretical framework, I state the following opposing hypotheses on Sino-Nigerian relations.
1) Through the accelerated relations with Nigeria, China is enhancing its energy supply security. Because of the level of oil production and the amount of proven reserves in oil, energy is the main incentive for China’s increased involvement in Nigeria.
2) China’s increased involvement in Nigeria is not only related to energy supply security. Nigeria plays a key role in strengthening China’s relative power position in the
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1.8 Sources and Data Collection
I will analyze the Chinese energy situation, policy and the relation between the Chinese National Oil Companies and the Chinese state. The Chinese energy situation will be analyzed through data from British Petroleum(BP) Statistical of World Energy 2018 and several years of the China Statistical Yearbook. These statistics will be divided in sectoral consumption: Transport, industry, building, construction, agriculture, and other sectors, and in energy sources: coal, oil, natural gas, nuclear, and renewables. The Chinese policy will be reviewed through the 13th Five Year Plan focused on energy, found in the policy and
measures section of the International Energy Agency (IEA). I will add the BRI and the ‘Going out’ strategy to this analysis and will analyze the BRI through official state documents.
To analyze Nigeria’s economic, energy, and demographic position in Africa, I will first present a comparison with two other countries based on data from the BP Statistical Review of World Energy 2018 and Worldbank. Adding to this, I will use secondary literature to analyze Nigeria’s position as a regional actor. To determine the political position of
Nigeria, the primary and secondary literature on the Economic Community of Western African States (ECOWAS) and the Forum on China-Africa Cooperation (FOCAC) will be analyzed. The primary literature will consist mostly of official publications on the website of the Forum, presenting the preliminary work and outcomes of the summit.
To analyze the Sino-Nigerian relations and the investment and construction projects, I will use the databases of the Global China Investment Tracker (GCIT) created by Scissors. The presented data will entail an overview of the investment and construction projects in transport and energy. To understand how China is providing this level of economic and financial assistance to Nigeria, the secondary literature on China’s finance capabilities will be used.
To put the involvement and actions of China in perspective of world power, I will use Power Cycle Theory to present China in relative percentage of power compared to ten other states. I will use the model presented by Doran and use data from Worldbank to calculate China’s relative position. Thereafter, I will present an analysis of the effects of China’s power position on Nigeria an Africa. I will use secondary literature and trade data to understand the effects.
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1.9 The organization of the Thesis
The thesis will be divided into five chapters. The first chapter will be the above-written text, providing an overview of the literature and theory which are part of the research in the following three parts. The second chapter will give an overview and analysis of the current energy situation in China. The analysis entails an overview of the energy reserves per
resource, production per resource, consumption per resource, consumption per sector, and the import per resource. This will give a complete overview of the current energy situation in China. To understand the workings behind the energy situation, the chapter will continue with an analysis of China’s actors, policies and policy practice concerning energy. Chinese
National Oil Companies (CNOC) and their role China’s energy supply will be discussed. Several policies will be part of the analysis. The ‘Going out’ theory, the BRI, and the 13th
Five-Year Plan (FYP) will be connected to China’s energy-related and foreign policy goals. Chapter three will include a comparison with two other African countries, Algeria and Egypt. The comparison will be made based on demographic, economic and energy-related data. This to understand why China is focusing more on Nigeria. Thereafter, an analysis will be presented of the role of Nigeria in regional and international politics and its cooperation with China. The focus will lie on the role of Nigeria in the ECOWAS and FOCAC, and the cooperation of these institutions with China.
Chapter four will present an analysis of the economic relations that flowed from the political cooperation between China and Nigeria in 2006-2018. The focus will lie on the transport and energy sector of Nigeria and will make use of the Global China Investment Tracker (GCIT). Each investment and construction projects will be analyzed and put in the greater economic and political context of Sino-Nigerian relations.
Chapter five will analyze China’s relative position in the international order by applying the Power Cycle Theory. The position of China will first be analyzed on three sperate indicators. Thereafter, the three indicators will be combined into one to determine China’s relative position. The effects of China’s relative position on Africa and Nigeria will be analyzed afterward with a focus on South-South Cooperation (SSC). Chapter six will entail the conclusion of the thesis and the answer to the research question
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Chapter 2: The Chinese energy situation and related policy
2.1 Introduction
This chapter will consist of two parts. In part 1, I will give a detailed overview of the energy situation of China since 2006 until 2017. The overview will entail the following energy data: total of proven reserves by resource, total production by resource, total production by resource, total consumption by resource and consumption by sector. The resources will be divided into the following groups: oil, gas, coal, nuclear and renewables. The sectors under review will be the following: industry, transport, building, and other
sectors. With this overview, I will analyze the energy situation of China in a detailed fashion. The second part will consist of an overview of the current domestic and foreign
energy-related policy of China. The focus of policy will lie on the Thirteenth Five-Year Plan (FYP) of China and the BRI. Following the policy, I will go into the Chinese actors in the energy sector: the Chinese State Class (CSC) and the Chinese National Oil Companies (CNOC). This will be an analysis of the Chinese state-society-complex to understand the relationship between the CSC and the CNOCs. First, the political power structure of China will be analyzed. Second, the relation between state and market will be researched. Third, the role of the CNOCs in the practice of policy will be analyzed.
The purpose of the chapter is to present a detailed overview of the developments and current state of the Chinese energy situation. To understand why China is looking abroad for its energy security, first an overview of the Chinese production, consumption, reserves, and other related energy data is needed. Furthermore, it is imperative to understand how the Chinese energy sector is organized and connected. Policy and actors are key factors in domestic and international energy security strategy. This chapter will give the why and the how of the Chinese energy supply security.
Chapter two will, therefore, answer the first two sub-questions, namely: What is the current energy situation and policy of China concerning sectoral consumption and supply security? and Which policies is China implementing to further its energy, economic, security and political situation? Part one will answer the first question and part two will answer the second question.
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2.2 China’s energy situation 2006-2017
The year 2017 saw an increase in the growth of the primary energy consumption in comparison with 2016 from 1,2 percent to an average of 2,2 percent. Natural gas was the largest contributor to this increase in energy consumption, followed by renewables and oil. China experienced the largest growth in energy consumption, with a 3,1 percent increase compared to 2016. This meant that China experienced the largest growth in energy consumption for the seventeenth consecutive year.
Oil consumption grew with an average of 1,8 percent in 2017 and alongside this growth, the oil price increased from an average of $43,73 per barrel to $54,19, the first annual increase since 2012. Natural gas consumption rose 3 percent in total, the fastest growth since 2010. Both an increase in oil and gas consumption are led by China. Coal saw its first increase since 2013. After three years of successive decline, China’s coal consumption grew with 4 million tons of oil equivalent (Mtoe) in 2017 and was only bested by India who saw an increase of 18 Mtoe in 2017.
Nuclear energy grew with 1,1 percent with China in the first position, contributing an 8 Mtoe growth. Renewable energy is the resource that had the largest growth in 2017. A total growth of 17 percent or 69 Mtoe was recorded, with China contributing an increase of 25 Mtoe (BP: 2018). This was the last recorded year of global energy consumption. In this short overview, China is heavily featured. In terms of consumption, China is number one in oil and gas, and Chinese consumption is growing. In order to keep up with this growing consumption, China is becoming more dependent on imported energy from foreign countries. To understand China’s energy needs, a detailed analysis of the Chinese energy situation from 2006 until 2017 is needed. The starting year is chosen because of its relation to the start of the involvement of China in Nigeria, which will be discussed in chapters three and four.
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2.2.1 China’s energy mix
China’s energy consumption mainly consists of five types of resources available: Oil, coal, gas, nuclear and renewables. Chinese energy consumption has been steadily growing in the twenty-first century. Figure 2.2.1 shows the share of each of these resources in energy consumption between 2006 and 2017.
Figure 2.1: Chinese energy consumption mix 2006-2017
Source: Composed of data from BP Statistical Review of World Energy (2018).
Historically, coal has been the predominant resource in the Chinese energy mix. For China, coal has been a very important resource for its economic growth. Different from gas and oil, coal is abundant in China and widely distrusted over the country. Because of the abundance and the convenience of the placement within China’s border, coal played and plays a key role in the economic growth of China (Dong et al. 2016: 214). Although the share of coal in the energy mix is declining, 73,6 percent in 2006 to 60,4 percent in 2017, coal remains the main resource for energy consumption. Oil takes second place in the energy mix of China. Apart from decreases in 2007,2008 and 2011, the share of oil has increased. China is highly dependent on imported oil for its consumption. In the 1990’s, China became
import-dependent for its oil demand. Since then the oil demand has increased significantly (Zhang et
0,0 10,0 20,0 30,0 40,0 50,0 60,0 70,0 80,0 90,0 100,0 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 C o n su m p tio n in % Year
32 al. 2017: 637-638). Gas is becoming increasingly import for the Chinese energy mix. Between 2006 and 2017, the consumption has more than doubled from 2,5 to 6,6 percent of the total consumption. In recent years, global gas consumption has grown steadily with China
contributing the largest part of this increase (BP:2018). Nuclear energy is by far the smallest contributor to the Chinese energy demand of the five resources. With oil and gas prices rising and international pressure to decrease the coal share in the energy mix, nuclear energy
remains a viable option for China (Dong et al. 2016: 215). The share of nuclear energy has been steadily increasing over the period 2006-2017 but still only accounts for 1,8 percent of the energy mix in 2017. The share of renewables shows the focus of China’s domestic energy strategy. According to Zhang et al., China is currently in the sixth phase of its energy strategy called transition. This phase, which started in 2015, is characterized by the move away from coal towards renewable energy. In recent years China has been investing heavily in renewable energy to meet its energy demand and decrease its dependence on imported fossil fuels
(Zhang et al. 2017: 640).
2.2.2 China’s proven reserves
Although there is no single, accepted definition of proved reserves, it is commonly defined as the estimated quantities of a resource which is to be recoverable in future years from known reservoirs. This is demonstrated by geological and engineering data with reasonable certainty. The probability of recovering the resources from the reservoirs is often set on 90 percent, meaning that the resources have better than 90 percent chance of being recovered over the lifetime of the reservoir. Therefore, proven reserves are a conservative estimate of future recovered resources from known reservoirs (CIA Factbook). China holds proven reserves in oil, coal, and gas. Table 2.1 shows the growth of proven reserves between 2006 and 2016.
33 Table 2.1: China’s proven reserves by resource
Oil (10.000 tonnes) Coal (100 million tonnes) Gas (100 million cubic meters) 2006 275856,8 30009,2 3334,8 2007 283253,8 32123,6 3261,3 2008 289043 34049,6 3261,4 2009 294919,8 37074,2 3189,6 2010 317435,3 37793,2 2793,9 2011 323967,9 40206,4 2157,9 2012 333258,3 43789,9 2298,9 2013 336732,8 46428,8 2362,9 2014 343335 49451,8 2399,9 2015 349610,7 51939,5 2440,1 2016 350120,3 54365,5 2492,3
Source: China Statistical Yearbook (2007-2017).
In 2006, China held a total of 8.57 percent of total fossil fuel reserves. Coal was the largest contributor with 8.14 percent, with oil and gas both adding 0.21 percent (Shafiee and Topal 2009: 181-182). Coal remains the dominant reserve in 2016. With a total growth of 81,16 percent compared to 2006, coal reserves have grown steadily of this period. There was an increase in oil as well. The growth of oil reserves totaled 26,92 percent. With the share of oil increasing in energy consumption, this increase in proven oil reserves will not be enough to satisfy the oil demand. Contrary to coal and oil, gas showed a decrease of 25,26 percent. Although these reserves add to domestic energy supply, they only contribute a small part to the total energy production.
To put the Chinese reserves in perspective, Table 2.2 shows the Chinese reserves in 2017 in comparison with the US reserves and the world.
34 Table 2.2: China’s reserves in comparison with the US and World
China US World
Proven Oil Reserves (thousand million barrels)
25,7 (1,5%)
50
(2,9%) 1696,6 Proven Gas Reserves
(trillion cubic meters)
5,5 (2,8%)
8,7
(4,5%) 193,5 Proven Coal Reserves
(million tonnes)
138819 (13,4%)
250916
(24,2%) 10305012 Source: BP Statistical Review of World Energy (2018). Note: The US is chosen as a comparison since China and the US are the largest energy consumers in the world.
Table 2.2 shows that China has significantly smaller reserves in all three fossil fuels compared to the US. China holds a large percentage of the world’s reserve of coal, the predominant and primary resource in its energy mix. The gas and oil reserves, on the other hand, are significantly smaller. Table 2.2. shows that China can’t rely on its proven reserves for future demand in fossil fuels.
2.2.3 China’s Energy Production
Energy production is the resources domestically recovered to meet the energy
demands of China. To analyze what amount of energy China is able to produce domestically, first an overview of the energy production per resource. Table 2.3 gives the national
35 Table 2.3: Energy production China 2006-2017
Oil (million tonnes) Coal (million tonnes) Gas (billion cubic meters) Nuclear (Terawatt-hours) Renewables (Terawatt-hours) 2006 184,8 2569,7 59 54,8 446,7 2007 186,3 2759,9 69,8 62,1 500,8 2008 190,4 2903,4 80,9 68,4 665,1 2009 189,5 3115,4 85,9 70,1 664,3 2010 203 3428,4 96,5 73,9 781,6 2011 202,9 3764,4 106,2 86,4 788,6 2012 207,5 3945,1 111,5 97,4 992,9 2013 210 3974,3 121,8 111,6 1096,5 2014 211,4 3873,9 131,2 132,5 1277,1 2015 214,6 3746,5 135,7 170,8 1397,9 2016 199,7 3410,6 137,9 213,3 1514,2 2017 191,5 3523,2 149,2 248,3 1627,5
Source: BP Statistical Review of World Energy (2018).
Matching with proven reserves and the share in the energy mix, coal tops the list of the national energy production of China. The production of coal reached its peak in 2013 and has since then been steadily declining. Only in 2017, a small growth in coal production is
measured. The other fossil fuels, gas, and oil are significantly smaller in production than coal. Oil production reached its peak in 2015 but declined quite rapidly in recent years. In 2017, the oil production is nearing the 2008 level of production. Gas, on the other hand, is steadily increasing and saw the biggest rise in growth percentages of fossil fuels (8,21 percent). This coincides with the growing share of gas in the Chinese energy mix. Of the non-fossil fuels, nuclear add the smallest portion of energy production. The production of nuclear energy has been rapidly increasing since 2013, more than doubling the nuclear production in the period 2013-2017. Renewables are experiencing the most noticeable growth in the period 2006-2017. The production in 2017 is almost four times the production of 2006. Zhang et al. state that renewables became the focus of the Chinese energy strategy in 2015 but also before 2015, the share of renewables was increasing steadily (2017: 640). Renewables produce more than 6,5 times the terawatt-hours of nuclear energy which shows the focus and the importance of renewables in the Chinese energy mix.
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2.2.4 China’s energy consumption
China’s domestically available natural resources are not meeting the growing demand for energy. To analyze the gap between supply and demand of energy, an overview of China’s energy consumption will follow. Meeting the demand for energy to sustain the economic growth and development is an important part of Chinese policy towards energy security. Energy-exporting countries define energy security as ensuring the demand for their energy since they are not dependent on import but on the export of energy. For developing and emerging countries like China and India, with insufficient domestic energy resources, energy security lies in adapting their economies on the dependence of the global market (Yergin 2006: 70-71). China’s need for imported foreign energy is an example of the first type of resource scarcity in energy supply security. The domestic supply of China is not able to meet the energy demand of China. Demand-induced scarcity causes China to seek its energy
suppliers all over the world. Table 2.4 shows the energy consumption of China per resource in million tons of oil equivalent (Mtoe).
Table 2.4: Total energy consumption per resource in China in Mtoe
Oil Coal Gas Nuclear Renewables
2006 359,9 1454,7 49,7 12,4 101,1 2007 377,7 1584,2 61,1 14,1 113,3 2008 385,5 1609,3 70,4 15,5 150,5 2009 400 1685,8 77,6 15,9 150,3 2010 455,2 1748,9 93,6 16,7 176,9 2011 472,1 1903,9 116,2 19,5 178,5 2012 494,9 1927,8 129,7 22 224,6 2013 516,8 1969,1 147,8 25,3 248,1 2014 538,1 1954,4 162 30 288,9 2015 573,5 1914 167,4 38,6 316,3 2016 587,2 1889,1 180,1 48,3 342,7 2017 608,4 1892,6 206,7 56,2 368,2
Source: BP Statistical Review of World Energy (2018).
The Chinese consumption of energy is primarily filled with coal. Although the share of coal has decreased between 2013 and 2016, a small growth in consumption is seen in 2017.
37 The growth of the total consumption has been increasing steadily in the period 2006-2017 but has started to slow down in growth. This slow down is primarily caused by the lower growth in consumption of coal and oil. Renewables more than tripled in this period, showing the importance of renewable energy in consumption as well. Nuclear is becoming increasingly larger in energy consumption but is still by far the smallest contributor to the total energy consumption. Similar to renewables, gas is experiencing rapid growth in consumption levels, with an increase of 14,78 percent in 2017 and a consumption level that is four times higher than the 2006 level. Comparing the consumption with the production in China, a large gap between supply and demand is noticeable. To get a better grip on where the
(over)consumption of China finds its roots, a sectoral consumption overview will be given.
2.2.5 China’s sectoral energy consumption
To get a better grip on where the (over)consumption of China finds its roots, a sectoral consumption overview will be given. This overview will show in which sector is the cause of China’s demand induced scarcity. Figure 2.2 shows the energy consumption per sector in 2000-2016
Figure 2.2: Energy consumption per sector 2000-2016
Source: Composed with data of the China Statistical Yearbook (2018).
70% 72% 72% 68% 67% 2% 1% 2% 2% 2% 8% 7% 8% 9% 9% 21% 19% 18% 21% 22% 2000 2005 2010 2015 2016 0% 10% 20% 30% 40% 50% 60% 70% 80% Year
Percentage of total energy consumption
38 Table 2.5: Energy consumption per sector in China in 10.000 tonnes of coal equivalent
2000 2005 2010 2015 2016 Industry 103014 187914 261377 292276 290255 Construction 2207 3486 5533 7696 7991 Transport 11447 19136 27102 38318 39651 Other Sectors 30296 50833 66636 91615 97922 Total 146964 261369 360648 429905 435819
Source: China Statistical Yearbook (2018).
China’s sectoral consumption shows a big gap in consumption between the industry sector and the others. The share of the industrial sector has been decreasing since 2010. Even with this decrease in the percentage of total consumption, the industry sector is responsible for two-thirds of the total energy consumption in China. The industry will remain the focal point for China’s domestic policy. In order to catch up with high-tech industry sectors of the developed world, China is applying a very ambitious and large-scale policy Made in China 2025, upgrading the Chinese industrial sector to one of the most advanced and cutting edge technological sectors. China has a disadvantageous position in catching up with the
industrialized countries. The Chinese state is heavily investing in the technological upgrade which already is creating a boom in the demand for the smart technologies produced by the industrial sector (Wübbeke et al. 2016: 12-15).
2.2.6 China’s energy imports
China’s demand-induced scarcity is primarily caused by the industrial sector but all other sectors show growth in energy consumption as well. The energy consumption, production and proven reserves of China demonstrate that, in order to meet demand and sustain the economic growth, China needs to import its energy from elsewhere. To analyze the amount and origin of the imported natural resources, an overview of China’s energy import will be given. Table 2.6 shows the total energy import by resource.
39 Table 2.6: China total energy import by resource
Oil (thousand tonnes) Coal (kilotonnes of oil equivalent) Gas (Terajoules) 2006 145175 20626 36984 2007 163160 28087 156503 2008 178885 23810 179238 2009 203653 72320 297199 2010 237682 98794 585702 2011 263779 117445 1140118 2012 271027 151911 1550000 2013 281742 174105 1938411 2014 308374 154477 2183986 2015 335483 108753 2263361 2016 381007 136058 2747757
Source: China statistics International Energy Agency (IEA) (2018).
China is especially import-dependent for its oil demand. To meet this demand, China has a high number of import sources, but the majority of the import is located in three regions: The Middle-East, East and North Africa, and South and Central America. Apart from these three regions, a large portion of the oil import comes from the Russian Federation. Both the Russian Federation and the Middle-East are regions that other major importers, like the EU, are dependent on. China’s oil demand is slowing in growth but is still growing. Therefore, it is important for China to increase its number of oil suppliers to diversify its oil import.
Especially since Chinese oil production is decreasing (BP 2018). China is, however, not the only foreign actor who is dependent on these regions. Major actors like the EU and the US import heavily from these regions (Amineh & Crijns-Graus 2017: 340-341).
The gas import by pipeline is not as diversified as the oil import. Mostly from Central-Asia, the pipeline gas is imported from neighboring or nearby countries. The majority comes from nearby Turkmenistan. The gas import in Liquid Natural Gas (LNG), on the other hand, is highly diversified from different sources than the pipeline gas. South-East Asian countries Malaysia, Indonesia and Papua New Guinea contribute a large portion of the imports, but China especially imports its LNG from Australia and Qatar. Gas has been receiving an
40 has been growing which in turn will lead to higher dependence on gas-imports in the coming years (BP 2018).
Although China’s reserves in coal are far larger than its reserves in gas and oil, China is still dependent on coal import. China is moving away from coal dependency towards renewable dependency in its energy demand with a slight increase between 2015 and 2016. Coal was at its peak in 2013 but has been decreasing since coal is receiving a smaller share of the energy mix. For its coal, China is largely dependent on four countries for its import: Australia, Indonesia, Russia, and Mongolia, which provide 90 percent of China’s coal import. Australia is by far the largest, with Australian coal making up more than half of the import (Worldstopexports).
2.3 China’s domestic and foreign policy: energy and infrastructure
The analysis of the Chinese energy situation demonstrates that China is in need of import energy to be able to sustain economic growth. The following part will research the different policies that China implements to acquire the natural resources and strengthen Chinese energy supply security.
2.3.1 The 13th Five-Year Plan and its objectives
The regulation surrounding energy in China has several stakeholders with various
government institutions determining the regulation, CNOCs in a monopolistic position and a large number of Chinese consumers. China’s regulations are primarily based on the FYPs that are issued and approved by the State Council and the People’s National Assembly of China. Currently, the 13th FYP is in effect which was drafted in 2014 and accepted in 2015. The 13th
FYP entails the period 2016-2020 and is seen as a critical FYP for the goals and priorities of China for the coming twenty years. The central committee of the Communist Party of China (CPC) formed a Directives Paper in 2013 which provided a reform agenda for to usher in a new economic era. This new economic era is based on the separation between market and state under law and with this, entails major economic and social changes in the duration of the FYP. The 13th FYP is aimed at launching the first part of this reform agenda. The Plan sets
out ambitious goals like doubling the 2010 level of GDP per capita by 2020. The objectives put forward in the FYP are categorized by Aglietta and Bai (2016) in six broad categories:
41 1) The shift from a capital accumulation-led growth to innovation-led growth. A strategic
industry policy with a focus on innovation, as seen in the ‘Made in China 2025’ policy.
2) Spatial development. Linking rural and urban development to narrow the gap between all Chinese regions.
3) Green development. This development is a combination of several objectives: low-carbon economy, restore and preserve natural development through environmental protection, and the conservation and use of natural resources. The objectives
connected to the low-carbon economy involve a shift to renewable energy, low-carbon transportation system, recycling, and stricter supervision and regulation of emissions. 4) Inclusive development. This entails objectives related to reducing poverty, social
insurance systems, improving public health, and countering the problem of the aging population.
5) Reform in the financial sector and state-owned enterprises (SOE). In this, China wants to achieve longstanding goals of a rebalanced financial system that has no overreliance on banks.
6) Opening-Up. These objectives in this category have two main goals: attracting foreign investments to China and investment by Chinese enterprises in foreign countries to become a global competitor. China’s BRI is part of these objectives, offering an alternative form of economic integration (Aglietta and Bai 2016: 2).
All six of these categories are interlinked with each other. China’s energy security and foreign goals are dependent on the policy and practice that flows from the 13th FYP. For
the energy sector, number three and six are especially interesting. Number three shows a move towards renewables and away from fossil fuels. This move towards renewables would make China less dependent on foreign energy since China is able to produce a large amount of renewable energy domestically. Number six shows the need to go abroad for economic, energy-related, and political goals. It incentives Chinese firms to invest in foreign countries. Alongside other sectors, investments in foreign energy sectors are important for China’s energy supply security and battling the demand-induced scarcity. The move to renewables is also a measure for the demand-induced scarcity of China.
