The Sino-Qatari relations within the framework of China's energy supply security strategy in the Middle East

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Graduate School of Social Sciences

The Sino-Qatari Relations Within the Framework of China’s

Energy Supply Security Strategy in the Middle East

MSc Political Science: International Relations - Thesis

Research Project: The Political Economy of Energy

Author: Niccolò Mannari – 11697547 Supervisor: Dr. M. (Mehdi) P. Amineh Second Reader: Dr. R. J. (Robin) Pistorius

Amsterdam, The Netherlands June 22nd_{, 2018}

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Acknowledgements

The journey that brought me to the completion of this thesis was full of wonderful people that helped me go through five months of intensive and hard work. And I want to thank them all in this short, but very important passage.

First and foremost, I want to thank my parents Andrea and Cristina for giving me the opportunity to come to Amsterdam and the UvA to enjoy an amazing year. I will never be able to show you how much I appreciate you. I also want to thank my professor, Dr. Mehdi Parvizi Amineh, for his efforts and energy, and for the passion on energy matters that he instilled in me during these eight months together. Then, I want to thank the “China group”, Bart, Jim, Lucas and Niek for their suggestions and constant remarks. In conclusion, I want to thank the people that helped me go through this whole thing with their smiles, jokes, kisses, hugs and opinions: Sebastian, Xiddu, Ella, Pietro, Matilde, Guglielmo and my brother Lorenzo.

Thank you all.

Niccolò Mannari 21st_{of June 2018}

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Abstract

This thesis sets out to explain the current situation of the Chinese energy supply security strategy in Qatar focusing on the development of the Sino-Qatari relations from 2003 to 2018, as well as analyzing in depth the current liquefied natural gas deals that two of China’s most important national oil companies, CNOOC and CNPC, inked with Qatari counterpart Qatargas in 2009 and 2011. Central in this thesis is the focus on the internationalization of Chinese national oil companies and their ties with the central government of Beijing. This will be done with the help of concepts taken from critical theories in order to shed light on the state-market complex in China, as well as in Qatar. I also found very helpful the resource scarcity model to explain how and why China has to seek outside its national border to secure its energy supplies, crucial to sustain the enormous growth of its economy. I described how the Chinese government system works, how the different agencies and ministries operate with the common goal of pushing China towards a brighter future and a constant economic development, while also establishing diplomatic relations with energy-rich countries like Qatar. Subsequently, I discuss the State of Qatar and how its authoritarian regime controls the oil and gas companies that own the huge natural gas resources the country has. I then delved into the Sino-Qatari relations and their importance for both countries, both strategically and commercially. Additionally, the thesis will analyze the Chinese presence in the Qatari economy in many sectors, from trade to investments, from finance to energy and finally, security. The thesis will conclude with an analysis of the possible threats and risks that Chinese national oil companies might face in Qatar and in the extremely instable Middle East region.

Key Words

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Map 1: China

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Map 2: Qatar

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Map 3: Middle East region and related oil/gas pipelines and fields

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List of figures

Figure 2.1

Primary energy demand by resource in China

32 Figure 2.2

Comparison China-RotW primary energy demand by fuel and

final consumption by sector

35 Figure 2.3

Energy capacity by technology in China (historical and

projections)

32 Figure 2.4

Chinese domestic natural gas consumption by end-use in 2015

35 Figure 2.5

Key government bodies overseeing energy issues

39 Figure 3.1

Board seats of Qatar Exchange Listed Companies held by

family

49 Figure 3.2

Qatar’s import partners

52 Figure 3.3

Qatar’s export partners

52 Figure 3.4

Top 10 importing countries of Qatari LNG

58 Figure 3.5

Top ten gas projects in Qatar in terms of remaining capex/boe

(in US$)

59 Figure 3.6

Qatari gas/oil fields and pipeline system map

60 Figure 4.1

China-Qatar bilateral trade (in billion US$)

65 Figure 4.2

Map of China’s natural gas and LNG receiving terminals 69

Figure 5.1

The “String of Pearls” route and the oil and gas shipping lanes

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List of abbreviations

AIIB

Asian Infrastructure Investment Bank

b/d

Barrel of oil per Day

bcm

Billion cubic meters

BP

British Petroleum

BRI

Belt and Road Initiative

CC

Central Committee

CCASG

Cooperation Council for the Arab States of the Gulf

CCP

Chinese Communist Party

CCPIT

China Council for the Promotion of International Trade

CDB

Chinese Development Bank

CHEC

China Harbor Engineering Corp.

CRCP

China Railway Construction Corp.

CSCEC

China State Construction Engineering Corp.

CEO

Chief executive officer

CIA

Central Intelligence Agency

CME

Coordinated Market Economies

CNOOC

Chinese National Overseas Oil Company

CNPC

Chinese National Petroleum Company

EIA

Energy Information Administration

EIU

Economist Intelligence Unit

EU

European Union

FDI

Foreign Direct Investment

FYP

Five-Years Plan

GECF

Gas Exporting Countries Forum

GCC

Gulf Cooperation Council

GDP

Gross Domestic Product

GHG

Greenhouse Gas

GTL

Gas-to-Liquid

ICBC

Industrial and Commercial Bank of China

IEA

International Energy Agency

IMF

International Monetary Fund

IOC

International Oil Company

IPO

Initial Public Offering

IR

International Relations

LME

Liberal Market Economies

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Mbpd

Million barrels of oil per day

MENA

Middle East North Africa

Mtoe

Millions of Tonnes of Oil Equivalent

NEA

National Energy Administration

NEC

National Energy Commission

NOC

National Oil Company

NPC

National People’s Congress

OBOR

One Belt One Road

OD

Organization Department

PSA

Public sharing agreement

PSC

Politburo Standing Committee

PNG

Piped Natural Gas

RCC

Renminbi Clearing Center

RMB

Renminbi

QEWC

Qatar Electricity and Water Company

QIIB

Qatar International Islamic Bank

QIA

Qatar Investment Authority

QIIC

Qatar Islamic Insurance Company

QIPCO

Qatar Investment & Projects Development Holding

Company

QH

Qatar Holding

QP

Qatar Petroleum

QSTec

Qatar Solar Technology

SCO

Shanghai Cooperation Organization

SOE

State Owned Enterprise

SASAC

State-owned Assets Supervision and Administration

Commission

SPR

Strategic Petroleum Reserve

Tcf

Trillion cubic feet

UAE

United Arab Emirates

UK

United Kingdom

UN

United Nations

US

United States (of America)

US$ (or USD)

United States Dollar

VoC

Varieties of Capitalism

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Chapter I

Research Design

1.1 Introduction

The aim of this research is to analyse and describe the energy supply security strategy that the People’s Republic of China has developed in the State of Qatar thanks to the activities of its national oil companies, focusing on the supply of natural gas from Qatar to China. As a consequence, I will examine the operations carried out in Qatar by the Chinese government, in the fields of diplomacy, security and strategy, and by Chinese enterprises, in relation to the economic aspects (trade, investment, finance). I will focus on the efforts of Chinese national oil companies in Qatar to understand the energy strategy of China in the country, which is primarily directed at the natural gas. Finally, I will discuss and take into account the challenges to Chinese energy supply security within Qatar (domestic threats) and in the whole Persian Gulf region (geopolitical risks).

The main objectives of this thesis are:

- discover the dynamics within the political economy of energy in China and Qatar; - understand the relationship between Chinese NOCs and the government;

- outline diplomatic and economic relations between China and Qatar; - delineate the energy supply security strategy of China in Qatar;

- assess the challenges and risks for the energy supply security strategy of China in Qatar and in the Persian Gulf region.

The timeframe will be set to the period 2003-2018, because before 2003 the relations between the two countries were limited to basic diplomatic relations. From 2003 onwards under the presidency of Hu Jintao this relationship evolved thanks to the signings of many agreements covering economic, political and cultural affairs; the relationship grew. The most significant phase in the history of Sino-Qatari bilateral relations, began in 2014, when the relationship flourished, entering a new era embarking on strategic economic and security partnership.

When studying energy supply security in China, the state emerges as a principal actor both because of the vital importance of energy security to its economic development and national security, as well as the monolithic nature of the political system. Therefore, to describe thoroughly the Chinese strategy in Qatar I need to start from the state-market complex in China.

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Within the government the most important body to take into account is the Communist Party’s Politburo Standing Committee (PSC) and its commissions related to energy policy and state-led companies. Given some slight similarities between the governmental systems of China and Qatar, the Qatari ruling family, the Al Thanis, is also perceived as a key actor.

In addition, other fundamental actors of this research are the two Chinese NOCs working in Qatar: CNOOC and CNPC (through its subsidiary PetroChina). Furthermore, I will study their Qatari counterparts: Qatargas (merged with RasGas on January 1, 2018) (Gulf Times, 2018) and Qatar Petroleum.

I believe that this thesis can be socially relevant because it shows the growing importance of natural gas within the energy security of China, especially for its strategy aimed at reducing CO2

emissions by replacing coal with natural gas (The Globe and Mail, 2018). In addition, it will help understand and forecast the behavior of China in the Middle East in a period of great instability and uncertainty for the region. The 2017 Qatar-GCC crisis shook all countries that import vast amounts of oil and gas from the region, and I believe it is interesting to see if such deadlock induced a drop in natural gas imports firstly from Qatar to China, and secondly from the region as a whole. This thesis will also try to explain possible outcomes of the recently approved extension of the presidential terms by the Chinese government, consolidating the power of current president Xi Jinping and its strategy for both the domestic economy and the world economy in coming years (The Economist, 2018), also in light of its speech during the 2017 World Economic Forum in Davos in which he made the case for a “Chinese leadership role in the world scenario” (Reuters, 2017). Moreover, it will clarify what China has been up to in Qatar and in the Persian Gulf region as a whole in recent years, economically and geopolitically speaking.

In addition, this thesis will add to the academic and scientific relevance explaining the key role of Qatar for the Chinese energy supply security strategy, adding to a lack of literature on this topic that I reported during the research of data and literature for my work. Most of the literature I found on the Sino-Qatari relations is mainly empirically descriptive, and not theoretical nor analytical; hence, this research will contribute to the development of scientific knowledge on this understudied case. I will try to focus my attention on the outcomes of the bilateral energy relations between China and Qatar, in order to analyze if such partnership jeopardized the other bilateral relations that China has in the region.

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Research question

What is the energy supply security strategy of the People’s Republic of China in the State of Qatar and what are the risks and challenges to this energy cooperation?

- How is the political economy of energy in China shaped by the state-market complex and what is the energy supply security situation of China?

- How is the energy industry structured in Qatar, what is the natural gas market situation, and what are the Chinese interests in the country?

- How the energy relations between China and Qatar developed? What bilateral activities and projects have been started by Chinese and Qatari NOCs in the natural gas sector?

- What are the challenges to the Chinese Energy Supply Security in Qatar? And in the region? To what extent the 2017 GCC-Qatar crisis affected the Sino-Qatari energy relations?

1.2 Literature review

To build a strong and cohesive thesis, I need to start reviewing the academic literature already present on the topics of energy studies and political economy. This literature focuses on the political economy of energy of China (mainly) and of Qatar (secondary). In addition, the relation between the State and the Business class in China is crucial to understand the energy policy processes and energy security strategy of Beijing. Moreover, this literature focuses on the role and activities of CNOOC and CNPC in the country, and the same for Qatargas and Qatar Petroleum within the Qatari state. This literature review is structured with the Chinese-related literature first, followed by the Qatari literature.

The Chinese resource scarcity literature is analyzed first; as a consequence, the energy (supply) security of China follows; thirdly, the energy policy is described; an examination of the foreign policy, focusing on the going-out strategy, follows; in conclusion the State-NOCs relations in China will be discussed.

The Qatari part will take into account the existing literature on the political economy of energy in Qatar and the relation between the Al Thanis and the NOCs.

China

Resource scarcity

China became a net importer in 1993 because of its rapidly increasing economy, that needed to be fueled with energy, namely oil and coal. The increasing domestic energy demand, accompanied by a decreasing domestic supply, forced China to go abroad and reach agreements with energy-rich countries in order to supply its huge domestic economic growth. Authors like

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Lee (2012), Chen (2014), Yao and Cheng (2014), Geng and Qiang (2016), Zhang (2016) and Amineh and Yang (2014) wrote extensively about this topic. Lee (2012) explained how the survival of the current political system in China depends on the safety and security of the energy supply from foreign states to mainland China. Chen (2014) also highlights the impossibility of China to support the economic growth with the domestic reserves, even with a thorough development of the technology, because of the insufficient amount of either oil or gas. So, the prospects for increasing the domestic production are limited to either coal, the most polluting resources in the energy portfolio of China, or renewable energies like hydro, solar or wind. Amineh and Yang (2014) spotlighted on the fact that energy and its procurement are vital for the Chinese ruling élite, given that without the constant flow of oil and gas from other countries the gargantuan economic “machine” would stop, threatening the survival of such élite.

Zhang (2016) also explained other reasons behind the surge of energy consumption in China from the 1980s and the 2010s: for instance, the Chinese population during this timeframe doubled; in addition, the energy intensive industry in China grew considerably; finally, alongside these two factors, the gross domestic product (GDP) of China increased by more than 20 times between the 1980s and the 2010s.

Energy security

The concept and definition of energy supply security is debated in the academic world. Yergin (1988) defines this concept as “The objective (of energy security) is to assure adequate, reliable supplies of energy at reasonable prices and in ways that do not jeopardize major national values and objectives”. The International Energy Agency (IEA) states on its website (IEA, 2018) that energy security is “the uninterrupted availability of energy sources at an affordable price”. Willrich (1976) wrote “Assurance of sufficient energy supplies to permit the national economy to function in a politically acceptable manner”. Lovins and Lovins (1981) introduced a definition that argued that energy security is to be reconsidered with more dimensions than merely the ability to keep oil flowing (or energy availability). I believe that the Yergin definition of this concept is the most accurate as it depicts and economic side as well as a political and strategic side to the energy supply security strategy.

Energy policy

After acknowledging the systemic resource scarcity, it is important to shine a light on the literature on domestic energy policy of China. Alongside the Chinese documents on the matter, mainly the so-called Five-Years Plan (FYP), Andrews-Speed and Dannreuther (2011), Lee

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(2012), Meidan (2016), Zhang (2016), Amineh and Yang (2017) discussed the topic of the Chinese energy policy, all agreeing on the fact that energy policy is central for the economic growth of the country in the new millennium. In the FYP, the Chinese Communist Party (CCP) outlines the State plans for all policies, mainly economic and energy related. The goals and targets of the CCP serve as an objective for all bureaucrats of China. In the two last FYPs, written in 2010 and 2015, new policies have been implemented in order to reduce the use of coal and to put incentives on renewable energies, not only to reduce greenhouse gas emissions, but also to decrease the dependency on foreign energy imports.

Lee (2012) states that China is increasingly developing its renewable energies sector, thanks to its FYPs, in order to reduce the domestic consumption of imported energies, namely oil, in order to deploy them for industry-related purposes instead of households heating. Meidan (2016) states almost the same, describing how China intends to focus on renewable energies in order to reduce the energy intensity and invest on renewables to potentially become world leaders.

Zhang (2016) adds that energy policies must be seen as tools to develop the interests of the political and business élites of China, through the activities of the national oil companies (NOCs).

Foreign policy and going-out strategy

The current literature on the foreign (energy) policy of China sees Lee (2012), Cao and Bluth (2013), Meidan (2016), Lin (2017), Amineh and Yuang (2017), describing some of the aspects of the Chinese behavior in the international relations. As abovementioned, the fact that China needs to import huge amount of energy forces the government to shape its foreign policy in the direction of establishing bilateral relations with energy-rich countries, exchanging goods and investments with oil and gas supplies. The cooperation between such states can be achieved either by force or by friendly agreements (Amineh & Yuang, 2017). Coa and Bluth (2013) emphasize on the friendly cooperation that China perpetrates with its image of a peaceful country, focused on a mutually-advantaging economic cooperation. China is keen to establish long and stable trade relations with other countries. Meidan (2016) agrees and explains how the Chinese Development Bank (CDB), the Asian Infrastructure Investment Bank (AIIB) and other Chinese initiatives go in that direction.

Lee (2012), however, disagrees and states that China’s action in the global scenario are challenging the West and its institutions: Lee gives some examples, such as the increasingly aggressive behavior of China in the South China Sea and in the Indian Ocean, regions where China has different interests, from oil fields to the security of trade routes.

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Lin (2017) also focuses on the effects of the still ongoing Chinese going-out strategy in the foreign policy of Beijing. The going-out strategy encourages companies to invest outside of China, in order to find new markets to sell the huge amount of goods that domestic companies produce. The abovementioned initiatives, the CDB and the AIIB, along with the One Belt One Road initiative (BRI), go in the direction of opening new markets for Chinese exports and find new opportunities for Chinese construction companies to build infrastructures. In addition, Lin states that these new institutions and initiatives are aimed at increasing China’s influence from Africa to East Asia, and from the Arctic Sea to the Indian Ocean, while at the same time helping Beijing to secure the energy supplies to China.

State-NOCs relation in China

The academic literature is still uncertain on how to describe this relation. The discussion tries to determine whether NOCs in China are independent, dependent or state-led.

Chen (2014) and Zhang (2016) go in the direction of relative independence of NOCs in relation to the central government. Chen notices that Chinese NOCs compete one another in foreign countries for new projects and for energy supply deals, meaning that they would not do so if the control over them was the same. Zhang describes the interaction between the State and the NOCs, noting that there is still a thorough supervision over the activities of the NOCs; nevertheless, such companies have become more powerful and independent in recent years, thanks to reforms of the energy sector in China.

On the order side, scholars and experts like Lewis (2007), Harris (2010), Lee (2012), Taylor (2014), Amineh and Yuang (2017), argues that NOCs are under strict control of the government, given that energy-related activities are of huge concern for Beijing officials, mainly for security reasons. Lee (2012) states that energy-related issues and strategies are too important to be left to market forces alone, and stresses that the government controls and directs the actions of the NOCs.

Qatar

Political economy of energy and foreign policy

Countries that possess a large amount of natural resources are considered to suffer from the so-called “resource curse”, also know as “rentier state”. This theory seeks to explain the impacts of external payments (or rents) on state-society relations and governance (Gray, 2011). Ramady (2014) tried to apply it for Qatar, stating that the heavy dependency of Qatar on its gas exports has forced the country to find purchasers for its gas and investors for its gas basins (Ramady,

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2014). New conglomerates with IOCs and NOCs from around the globe serve to this exact purpose, finding new, reliable and long-term investments in the country in order to grant financial and capital flows to Doha. Chinese companies are doing so as well, making agreements on LNG supplies to China for many years to come (Ibid.). In addition, other scholars like Altunisik (2014) and Coates Ulrichsen (2016) explained how Gulf States in general revolved their foreign policy around their natural resources exports, and how some of these states, mainly Qatar, Bahrain and the UAE, rose to prominence in the world scenario thanks to the huge reserves of gas and oil. Kamrava (2013) argues that Qatar, between the three abovementioned countries, has assumed an almost hyperactive diplomatic profile, while at the same time focused on boosting its position in the finance and trade realms. This happened, on one hand, thanks to the massive revenues accrued from Qatari hydrocarbon exports, specifically liquefied natural gas. On the other hand, this happens thanks to the cohesion of the institutional élite that streamlines the policymaking process and ensures political and diplomatic agility.

Al Thanis ruling élite

Institutional élite that is also extremely powerful and influential in the energy sector, owning the major company in the country, Qatar Petroleum (QP), who owns also Qatargas, the company supervising the natural gas sector. DSouza (2017) states that the Qatari royal family, the Al Thanis, have strict control over the whole political apparatus, as well as drives and manages all the state-owned companies, such as QP. DSouza also describes how the Al Thanis put member of other families with whom they hold strong ties in powerful posts of companies, institutions and state agencies, in order to control all activities of the strategic sectors of the state.

Sino-Qatari relations

The energy relations between China and Qatar are relatively recent, hence there are

relatively few works that specifically investigate this topic. Scobell and Nader (2016), as well as Olimat (2017), state that the relationship between the two countries actually started in 1988 with the recognition of the PRC as the only China, excluding Taiwan from all diplomatic ties. In the course of the years the economic and diplomatic ties revolved mainly around energy. Initial agreements were made by president Hu Jintao and premier Wen Jiabao during the first decade of the 21st_{century, but with the election in 2013 of current president Xi Jinping the relationship}

flourished (Ibid.) and important gas supplies were signed by the two parties (Wood, 2017). Other works from prominent authors on Sino-Arab relations, such as Kamrava (2017) and Reardon-Anderson (2018), briefly mention Qatar, but do not delve deep into the Sino-Qatari relations.

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Gap in the literature

The literature review has focused mainly on China’s resource scarcity problem and therefore its energy supply security strategy, NOCs and their relationship with the political élite; regarding Qatar, its political economy of energy and its foreign policy were at the center of the literature review, while also focusing on the way the Al Thani family rules the country.

However, literature on the Sino-Qatari relations, the similarities between the two countries and the state-NOCs relationship in both China and Qatar, is insufficient and/or mediocre, given the fact that also prominent scholars and authors stress the relevance of China and Qatar not only in the Middle East region, but also in the world scenario.

Therefore, this thesis wants to fill the existing gap on the Sino-Qatari relationship delving deeper into the bilateral cooperation between the two countries and not on the China-Middle East relationship as a whole. This thesis will also try to make some other contributions on if and how events that occurred in recent years affected the cooperation between China and Qatar, and the activities of Chinese NOCs in the Peninsula, as well as in the Persian Gulf region.

1.3 Theoretical and conceptual framework

To design and structure a well-organized thesis a theoretical framework is needed. Theory and concepts are fundamental in order to select the proper information, data and actors, and to connect the dots until the completion of an exhaustive research. To do so, I started from a broad view on different theories, and I progressively scaled it down to find the suitable concepts for this research.

As previously stated, China’s energy security is the starting point of my research, as it is the main reason why China is operating outside national borders with its NOCs. China’s energy security dictates the country’s energy strategy, hence its domestic policies targeting both consumers and domestic suppliers. My research tackles a multidimensional subject that includes a set of concepts, each of which needs to be theoretically addressed on its own to bring about a coherent theoretical basis for my research.

In the beginning I will explain why the classical theories of International Political Economy are not suitable to help me understand the Chinese energy supply security strategy in Qatar. Then I will describe the concepts that instead helped me writing a coherent thesis.

The first theory analyzed is economic nationalism. Economic nationalism focuses on the role of the state and the importance of power in shaping outcomes in the international political economy, in the same way of the International Relations (IR) theory of Realism, of which is a

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more detailed “version”. The state is the main actor and the interest of the nation is the main driver for its activities; because the international system is anarchy-based there is no space for cooperation, states are in conflict one another. Therefore, the world is a zero-sum game in which the gain of power and influence of one state is the loss of power and influence of another. This is why the interest of the nation is crucial, because it helps them defend strategic sectors from the competition of other states. (O’Brien & Williams, 2016). This theory seems to be suitable to explain the behavior of China and its NOCs but looking closely it is a simplistic description of a much more complex system. This theory lacks explanations of the transnational activities undertaken by many states, China included, and by giving the prominent role to the state, institutions and economic markets are underestimated in their power to influence the international system.

The second theory is liberalism. Liberalism centered either on the individual or on a wide range of actors, from the state to the companies to interest groups. Instead of believing in an anarchic international system, liberalists see the world as a system of interdependence in which states and peoples can cooperate. The world is no more a zero-sum game, it is a positive-sum game in which the gain of power and influence of a country can help other states do the same. Cooperation and free trade are tools with which states can help build a bigger and richer market for everybody to attain to. Economic progress is pursuable only through interaction, cooperation and interdependence. The free market is the main aspiration of liberalists as for their beliefs a free market is self-regulatory and efficient (O’Brien & Williams, 2016). Liberalism focuses too much on the market and its influence that underestimates the power of the state. Moreover, the Chinese energy market is not free, and Chinese energy companies are national companies, therefore the Liberalist theory does not apply to my research.

The critical theory is a set of cultural and post-structuralist political economy approaches that are labelled as radical as they challenge established forms of organization; in this case I will analyse the Marxist theory of philosopher and political theorist Karl Marx and its criticisms of Liberalism. The Marxist theory is centered on the interest of the working class and the worker. Marx focused on the oppression of classes across societies and stated that capitalists are guilty for the exploitation of the working masses. In critical theory the same concept is applied to states and exploitation between them, therefore the international system is conflictual (O’Brien & Williams, 2016). This last concept of the critical theory can be helpful for the development of my thesis.

In addition to such theories, the Varieties of Capitalism (VoC) framework created by Hall and Soskice (2001) is a handy tool to understand the relation between state and business classes. In

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this framework, capitalist economies are divided into Liberal Market Economies (LMEs) and Coordinated Market Economies (CMEs).

The whole debate of comparative capitalism in the academic literature revolved around three main perspectives: the “modernization approach”, the “neo-corporatism” and the “social systems of production approach” (Hall & Soskice, 2001). The first focuses on the structure of the state and its capacity to secure national growth. The second stresses the capacity of the state to negotiate favourably with employers and employees’ association groups. The third spotlights on the behaviour of firms and how they operate and generate trust (Hall & Soskice, 2001). Hall and Soskice however criticize these three perspectives stating that they fail to adequately model the interactions between the main actors of the capitalist market.

Therefore, Hall and Soskice built a new framework for studies of comparative capitalism. In this framework, a relational view of firms is the starting point of the analysis. The relation of companies with other actors, such as their own employees, labour unions and other companies, are the unit of analysis. This framework will be used to explain the state/market relations in China because it is funded on actors and their behaviour.

Hall and Soskice describe five spheres in which firms nourish relations to successfully engage in the capitalist economy. The first sphere is the “industrial relation”. The second sphere focuses on “vocational training and education”. The third is the sphere of “corporate governance”. The fourth sphere is rather broad and focuses on the coordination problems that appear with “inter-firm relations”. The last sphere of coordination problems is the relation with “employees”. Based on these five spheres, Hall and Soskice (2001) identify two ideal types, the LMEs and the CMEs. These ideal types are based on the idea that the relationships of firms differ across nations and can roughly be clustered into these two ideal types. The first ideal type, the Liberal Market Economy (LME), utilizes the market and hierarchy as the main tool of coordination. Based on market signals (for example price signals) the actors adjust their willingness to supply or demand goods and services. The second ideal type, the Coordinated Market Economy (CME), relies more heavily on non-market institutions to solve the coordination problems. Differently from LMEs, in which demand and supply define the equilibrium of results for firms, in CMEs, strategic interaction between firms and other actors are at the heart of the equilibrium of coordination. This consists in extensive relationship of collaborations, instead of competition, to advance and progress. The different ideal types of capitalism emphasize the presence of institutions related to cooperative behavior among actors. These institutions provide information, monitoring and the sanctioning of defections on which firms coordinate their relationships (Hall & Soskice, 2001). Based on the complementarities of institutions the states

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can be divided into one of the two ideal types. This framework can be applied empirically to China. In order to apply it empirically, it is needed to describe the five spheres of the VoC. The first sphere in the VoC is the “industrial relation”. This relation is centred on the problem of how firms should coordinate bargaining on wages and working conditions (Hall & Soskice, 2001). Ahrens & Junëmann (2010) state that in China this relation looks more like a CME, even if there has been a move towards LME in the recent past. In China, managers are, to some extent, judged based on their role in the community regarding employment. This provides an incentive to coordinate with the working force on wages and working conditions. Nevertheless, unions are state-owned associations and have a top-down structure. Moreover, employment protection in China is even lower than in LMEs. China can, therefore, be seen as more leaning towards an LME, despite having some characteristics of a CME.

The second sphere is “vocational training and education”. Hall and Soskice (2001) argue that in LMEs, education is more focused towards general skill. In CMEs, firms are also more focused on products that require specific skills, due to coordination and better employment protection (Hall & Soskice, 2001). Therefore, skill-specific education tends to pay off more than in LMEs. Currently, in China there is a mismatch between the demand and supply of working skills. The industry is more focused on specific skill, but the Chinese education system focuses on general skill. Nevertheless, China is more LME-like.

The third sphere in the VoC framework of Hall and Soskice (2001) is “corporate governance”. In LMEs firms rely mostly on short-term market-based capital. They look at investors to provide this capital. In CMEs, on the other hand, firms tend to rely more on longer-term finance from banks. With regard to the energy sector in China, the oil companies are mostly state-owned. Therefore, China can be seen as a CME.

The fourth sphere described in Hall and Soskice (2001) is the relation between the management and employees in firms. In CMEs, the employees of a firm are involved in the internal decision-making process, and their relationship is based on cooperation. On the contrary, in LMEs the system is top-down and the relationship between employers and employees is not cooperative (Hall & Soskice, 2001). In China, the relation between the management and the employees is even more top-down than in most LMEs, so China is more alike to LME.

The fifth sphere regards “inter-firm relations”. In this sphere, the relations between firms is fundamental (Hall & Soskice, 2001). In LMEs, these relations are more based on competition, a fluid labour market and the legal system, while coordination and trust are more important in CMEs (Hall & Soskice, 2001). In China, companies normally don’t fight one another, they just work towards the same goal of common development. Therefore, China shows CME

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characteristic. China can be seen as a mix between LME and CME, which cannot be placed into one of the ideal types of Hall and Soskice; therefore, China’s state market relations can best be described as a special type of capitalism, often referred to as “Chinese capitalism” (Witt, 2014). In the end we can say that neither LME, nor CME can perfectly describe China.

Nevertheless, these theories result to be still too broad and general. Within the critical theory an approach that blends geopolitics, geo-economics, international relations and economics can be found: the critical geopolitics. Through such set of concepts and tools, conceived by Harvey in 1985, the International Political Economy is connected to geographical aspects and geo-economic drivers in order to reach a more complete set of concepts, able to describe the behavior of countries in the world scenario. The concepts of “capitalist logic of power” and “territorial logic of power” set two different set of ideas to understand how certain states are managed: the former states that countries prefer to interact one another in an exchange of capitals and goods, whereas the latter believes that keeping all means of production and most of the capitals inside the domestic borders is more efficient and more secure. Still, this argument is not enough valid for the Chinese case, as China shows elements of both arguments. It is with Amineh and Yang (2017) that we have a complete and suitable set of concepts to analyze China and its behavior. As previously said, China needs to fuel with energy its industrial growth, but the scarcity of such resources force Beijing officials to go abroad and make deals to supply homeland China with oil and gas. In exchange China let capitals flow outside of the national borders and to the energy-rich partners across the globe. Such attitude has changed overtime, as until recently China was closed to the world, and vice versa. Amineh and Yang (2017) used the concept of lateral pressure to describe how and why China has changed approach: they say that the pressure on the government coming from social and economic forces, willing to expand their consumption and production, pushed Beijing to expand its economic activities and diplomatic ties outside national borders in order to still keep the same control over the country. Control that is shared in China between the state class and the business class, in a fluid exchange of personnel from one to the other. This relation between the élite and the people is then a top-down type. The fact that China uses such approach shows how intertwined politics and economics are, and how the state and its status quo are on top of all goals and interests, even economic. These concepts are useful to explain the behavior of China domestically, as well as in the world scenario, given the fact that national interests always come first.

Another helpful theory is the “resource scarcity” model developed by Amineh and Houweling (2007), which provide an analytical classification of the main types of energy scarcity and helps identify their fundamental causes. They present three main forms of scarcity: demand-induced

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scarcity, supply-induced scarcity, and structural scarcity (Ibid.). This theory seeks to highlight the different implications and challenges of each type of energy scarcity on energy security and on the economy as a whole and how it is possible to bring about viable plans and policies to mitigate these challenges. China is facing an increasing demand-induced scarcity as its population and industrial growth have been rapidly growing over the past decades and are expected to grow further (World Bank 2017). This model links China’s economic industrialization with its need of pursuing energy supplies outside its borders in resource rich countries like Qatar.

1.4 Outline of the argument and hypothesis

H1: China’s efforts in diplomacy and FDI with Qatar ensured a considerable supply of gas to diversify the domestic energy portfolio and secure the energy supply strategy of Beijing.

H2: The similarities in the nature of the political systems in both countries uphold the cooperation between China and Qatar.

H3: Sino-Qatari relations were affected by the 2017 Qatar-GCC Crisis, especially in relations to the natural gas supplies to China.

1.5 Research method and operationalization

I will use a mixed method for my thesis as different issues can be discussed properly with different methods.

I will use both qualitative and quantitative methods for the second chapter in which I will talk about the power structure of China, its state-society complex, its energy market, as well as the decision-making process of the companies operating in it. I believe that both data and policy reviews, secondary literature with articles, books, think tank summaries and interviews can be extremely helpful.

The third chapter will see the same approach in relation to the Qatari and its NOCs

The fourth chapter will see a more in-depth research on the concrete activities that Chinese NOCs and companies have in Qatar, therefore I will need do take the most out of datasets and databases that I have been collecting since day one of the courses. I will use them together with other articles and yearbooks of the companies, as well as with secondary literature contents. The fifth chapter will focus on the geopolitics of the Persian Gulf region (mainly Iran-Saudi Arabia relations) and the challenges it brings, along with domestic challenges of Qatar, to the energy supply security of China.

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1.6 Structure of the work

This thesis is organised in six chapters, of which the first one will be derived by the updated research proposal and will see addition in the coming months, especially during the last weeks. In each chapter I will find the answers to the question and sub- questions that I have asked in the related part.

In chapter two I will focus on the power structure and state-market complex of China, addressing also the domestic political economy of energy. The energy sector will be described, likewise the relation between the state and the NOCs, CNOOC and CNPC, both active in Qatar. Firstly, I will make an introduction; secondly, I will take into account the power structure and state-market complex; thirdly I will review the energy situation and state-market and its three major companies in order of importance for my research: CNOOC and CNPC/PetroChina; finally, I will conclude with some remarks, while also answering the first subquestion: “What is the energy

supply security situation?”

In chapter three I will make the same outline for the analysis of the State of Qatar. Starting by an introduction I will then analyse the power structure and state organization; I will go through the energy situation and market of Qatar and its main actors Qatargas and Qatar Petroleum; in the end I will answer the sub-question: “How is the energy industry structured in Qatar, what is the

natural gas market situation, and what are the Chinese interests in the country?”

Chapter four will see the description and analysis of the activities carried out by Chinese NOCs in Qatar, what are their Qatari counterparts, what are the economic (trade, investment, finance) bilateral activities and future projects between the countries in the natural gas sector and in trade. I will then conclude answering to the sub-question: “In light of the previous sub-questions, how the

energy relations between China and Qatar developed? What bilateral activities and projects have been started by Chinese and Qatari NOCs in the natural gas sector?”

Chapter five will see describe the possible challenges to the Chinese energy supply security in Qatar and in the Persian Gulf region; what have been in recent years the risks that Chinese NOCs have undertaken and how they successfully (or not) overcame them. I will answer to the sub-question: “What are the challenges to the Chinese Energy Supply Security in Qatar? And in the

region?”

Chapter six will draw the final conclusion of my research, outlining the results I made as well as possible limits. I will also answer to this final sub-question: “Have we experienced an increase of

interest from China in Qatar? And in the region? What are the possible outcomes of the Chinese increased interest on the geopolitics of the Middle East?”.

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Chapter II

The People’s Republic of China: energy industry, natural gas sector and

NOCs

2.1 Introduction

The purpose of this chapter is to serve as a foundational step towards the specific inquiry of this research, by addressing the first sub-question: “How is the political economy of energy in China shaped

by the state-market complex and what is the energy supply security situation of China?”

In the next pages I will try to answer this central question, and to do so I will start analyzing the Chinese state-market complex in order to categorize China into a narrowed-down theoretical framework of how the main actors in China (the Government and the economic actors) interact one another. I will then define the concepts of resource scarcity and energy supply security, crucial to understand how and why China operates in the world energy industry; I will describe the current Chinese energy situation and energy mix, as well as the forecasts for the future of the industry. I will narrow down the focus on the gas sector, as the core of this research is the energy supply security strategy of China in Qatar, its third largest natural gas supplier.

In the following part I will take into account the institutions overseeing energy matters and some of the most important energy policy efforts to date I will conclude presenting Chinese NOCs and their relations with the CCP, give also an overview on the two NOCs operating in Qatar in relation to natural gas, CNOOC and CNPC subsidiary PetroChina.

2.2 Overview of China

To understand China’s energy profile and its energy supply security strategy it is fundamental to contextualize the collected data within the greater historical and economic reality that shaped the rise of China as a global superpower in the last quarter of a century.

The Chinese developmental model that successfully asserted the country as the world’s largest manufacturer (The Economist, 2015) has created, as a consequence, an enormous natural resources demand, mainly for oil and coal. In the first years of economic growth China was able to cope with the increasing domestic demand thanks to its oil and coal reserves. Nevertheless, since 1993, when the domestic oil production was around 2.6 mbpd (EIA, 2017), the People’s

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Republic of China became a net importer of oil as oil demand surged ahead of domestic production (Jiang & Sinton, 2011) (Andrews-Speed, 2014). At the same time, the use of coal increased for both household and factories consumption, accounting for more than 60% of the total energy consumption (EIA, 2017). Natural gas remained extremely low in the same timeframe accounting for an average 14 bcm (EIA, 2017). This very fast economic transition has led to a sharp increase in energy consumption, whether through the established energy intensive industries, or through an increasing per capita income. Along this, urbanization in China has risen drastically over the same years, passing from 17.92% in 1978, to 52.57% in 2015 (Zhao & Wang, 2015), which translates into higher standards of living, inconveniently (mainly for the Chinese government) paralleled with higher consumption of energy.

Therefore, since 1993, China faces the challenge of maintaining its energy supply for both the short and long term and tries to diversify its portfolio of energy importers countries to avoid risks of shortages in case of retaliation from other countries, or increased demands for extraordinary situations. In order to maintain the country’s energy supply security China has implemented several new administrative reforms, accompanied with the establishment of new institutions, agencies and companies (Li, Zhang, Tang, 2016). These new policies helped China to pursue its economic growth and its rising importance in the world order securing the country with the energy supplies it needs.

2.3 Chinese state-business relation

Following Mao Zedong’s victory in the 1949 Chinese civil war, Mao became President of the People’s Republic of China. Thus, the country was governed by the Chinese Communist Party (CCP) of which Mao was the President. The power in China was mostly in the hands of the CCP and all the officials and the whole administration was governed by an élite. Nowadays, with roughly 90 million members (1% of the world population), the power of the Chinese state is still based in the Party (Lawrence & Martin, 2013).

In China, firms are embedded in different kinds of social networks (Fligstein & Zhang, 2010). These social networks are pivotal in the development of local economies and the private sector in China. These social networks have their origin in Confucianism and foster inter-personal relations (Fligstein & Zhang, 2010). In these relations, government officials, in coordination with economic actors, try to establish the conditions for economic growth of the companies. Therefore, besides the ties with other companies and costumers, in China especially the relations with the local and national government are crucial.

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In China, the government officials are important in this network. In line with the constitution, the CCP is represented throughout the entire society. In every major company, one or more party representatives are part of the management. These networks are highly personal and are reinforced by the CCP. The Chinese state-class is central in the network building and coordination in the Chinese Economy. The Chinese state class is estimated to exist out of roughly 41 million members (Goodman, 2014). If only looked at 500,000 of the state class in a leadership position, it becomes clear that the real power in China is really concentrated. Out of these 500,000 members, the key elite is chosen (Amineh & Yang, 2018). Because the key officials of the Chinese government are chosen from the state-class, the state-class has substantial influence over the CCP, the institutions and Chinese policy. The 500,000 state-class élite are spread-out throughout society, with important positions in all major companies and all layers of the government. This makes the state-class hugely powerful in China. Since the key officials of the Chinese government are chosen from the state-class, the state-class has substantial influence over the CCP, the institutions, and Chinese policy. In addition, many of the current top ranked officials in the administration previously worked in the board of directors of SOEs, and vice versa (Chen, 2014). China’s energy élite fully incorporated into the central government. China’s government bodies have full authority over the appointment of CEOs for the three major NOCs1

and the government is the only regulator of the energy sector. President Xi Jinping stands at the top of the hierarchal pyramid. As party secretary and head of both the Central Committee (CC) and the Politburo Standing Committee (PSC), Xi Jinping has a final say in almost all party-related affairs. The fact that in 2018, under his presidency, the Chinese constitution was changed by the National Peoples Congress abolishing the maximum of two 5-year terms, can be seen as another move to further increase the power of the ruling élite allowing him to become, in principle, president for life. China’s current premier Li Keqiang is leader of the SC, the country’s highest organ of the executive state power. The SC works as a cabinet and supervises many agencies and ministries. Among these agencies is the Organization Department (OD). The OD is the central human resources department of the CCP. This body has the power to appoint and dismiss the chairmen and CEOs of the NOCs and functions as a stepping-stone for those chairmen with the ambition to pursue a career in party politics. Current head of the OD is Chen Xi, also one of the 25 members of the Politburo and Secretary of the SC.

Things therefore are extremely different from the perspective that Westerners have: in the PRC all policies, all foreign policy decisions, all activities of strategic sectors of the state come from above, from the ruling élite of China, the opposite of what happens in the West where citizens

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vote for their representatives to sit in the Parliament and try to pass policies and laws directed to improve the condition of the country. The system in China is radically different.

2.4 Power and energy sector in China

Ever since the establishment of the People’s Republic of China in 1949, energy policy has been a priority of the government’s activity to secure the needs of the industrial and economic development. Many historical events posed a threat to the security and stability of the Chinese growth; as a consequence, the government decided to further improve and develop the energy supply strategy and the energy security of the country (Leung, 2011). In the next paragraphs I will describe the energy mix and energy situation of China to understand its energy policy and its efforts to improve the energy supply security of the State, as well as to reduce the levels of greenhouse gasses (GHG) emissions, of which China is the world’s largest producer with more than 27.5% in 2014 (Hu, 2016).

Before analyzing the Chinese energy sector, is crucial to describe two aspects of it: the systemic resource scarcity of China, and thereof its energy-importing nature, and the energy supply security strategy that China needs to constantly develop, a consequence of the prominent role of China in the global political and economic scenario. China is the world’s largest energy producer, with 2538 Mtoe, and consumer, accounting for over 3000 Mtoe (EnerData, 2017). Out of the total production 70% is derived from coal/lignite, the most polluting energy sources in the world (Stanford University, 2008). The difference between the energy production and consumption of China perfectly shows that the country faces a resource scarcity, especially if we highlight the coal consumption percentage in the energy mix of the country. China is investing across the globe in order to secure the continuous flow of oil, gas and also coal to the Chinese mainland, and my case study, Qatar, is one of those countries.

Given the fact that China is an importer of energy, possible threats to its oil, gas and coal imports are one of the main concerns for Chinese officials. For strategic and war-related reasons China is improving its Strategic Petroleum Reserve (SPR), filling its stocks and building new facilities (Reuters, 2017-2). Chinese SPRs specifics are not disclosed by the government, but it is estimated to be around 400 million barrels, with a capacity of approximately 500 million barrels (Li & al., 2017). Alongside strategic and war-related supplies, China imports oil, gas and coal to secure the continuous economic production (and growth). Nevertheless, new threats come from environmental issues, that China wants to face in the present and in the coming years, with new measures to reduce polluting resources from its energy mix. In the 2015 United Nations Climate

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Change Conference held in Paris, China agreed to increasingly reduce the use of coal and lower Co2 emissions, while at the same time investing more than $350 billion in renewable energies (Reuters, 2017-1). Therefore, China faces a great challenge: reducing its coal percentage in the energy mix, while granting its population’s increasing energy demand with supplies and assuring the nation’s energy supply security from threats of various nature.

2.4.1 Energy mix

The Chinese domestic demand for energy increased sharply in recent years thanks to the rapid economic development, and it is likely to increase in the coming decades (BP, 2017). Since 2010, China is the biggest energy consumer in the world, with almost a quarter of the world’s total, reaching 23% (BP, 2017). In Fig. 2.1 is clear how the Chinese demand grew since the new millennium. In 2010 China surpassed the 2000 million tonnes of oil equivalent (Mtoe) for the first time.

The major energy source used in China is coal (of which China is by far the world’s largest producer), whose domestic consumption is met thanks to domestic production, which in 2010 reached 3.2 billion tones (Ma, 2015). In the total energy production output coal accounts for 70% (1000 GW) and with 63% for the total energy consumption output (EnerData, 2017). Nevertheless, China is slowing the pace of coal production in order to meet the goals of the 2015 Paris Agreement (Reuters, 2017-1), but also because at current production levels, China has just 30 years of reserves (BP, 2017-1). Figure 2.1 shows how China is still dependent on coal for its energy mix.

The case is different for oil, which despite a slow increase in production from 1.34 to 1.55 billion barrels, fails to meet the country’s needs (Meidan, 2016). China nevertheless, holds 24.6 billion barrels of proved oil reserves, a considerably high amount (EIA, 2017). The share of oil in the energy output is around 18% (EnerData, 2017). Due to the significant difference between the oil consumption and the domestic oil production, China is forced to import a substantial part of its oil. In 2014, China imported 6.2 million bbl every day (EIA, 2015). This makes China the largest importer of oil in the world; it surpassed the US in 2014 (EIA, 2015). China’s import dependency rose from 30% in 2000 to 57% in 2014 and is likely to continue to grow, despite intentions of the government to curb the dependence on oil imports (EIA, 2015) (Meidan, 2016). Oil is the most strategic resource for China, and that is the reason why the greater part of its national energy supply security strategy is linked to the diversification of the oil suppliers’ portfolio and securing of SPRs (Zhou, 2018).

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Fig. 2.1 – Primary energy demand by resource in China (EIA, 2017)

In order to diversify the total domestic demand of energy, also natural gas is needed. This resource has been less important for China in the past, but in the coming years natural gas will play an increasingly important role in the diversification of the energy mix and the lowering of GHG emissions (EIA, 2015), as seen in the 13th_{Five-Year Plan of 2016 (Hu, 2016). As of 2016,}

China’s proved natural gas reserves amounted for 164 trillion cubic feet (Tcf), the largest in the Asia-pacific region (EIA, 2017). Gas accounts for around 6% of the total energy consumption, but by 2020 natural gas is expected to supply more than 10% of the total, thanks to imports and new developments in the shale gas field (Ma, 2015) (Hu, 2016) (EIA, 2017). China’s production of natural gas has risen in the past decade, tripling from 2003 to 2013 reaching 4.1 Tcf, risen to 4.3 Tcf in 2014, as a result of the government’s goal of 6.5 Tcf to be reached by 2020 (EIA, 2017). China has always been able to cover its natural gas needs with domestic production, but in 2007 consumption exceeded production: China became a net importer of natural gas (EIA, 2015). In 2016 China imported a total of 34.3 bcm of natural gas in the form of liquefied natural gas (LNG), mainly from Australia (15.7 bcm), Qatar (6.5 bcm) and Indonesia (3.7 bcm). In addition to the LNG, piped natural gas (PNG) was imported for a total of 38 bcm from neighbours Turkmenistan (29.4 bcm), Uzbekistan (4.2 bcm) and Myanmar (3.9 bcm). The amount of Chinese imported natural gas totaled 72.3 bcm in 2016 (BP, 2017).

Much of the imported LNG is used in the major coastal cities in which LNG port terminals receives ships (Wang & al., 2013). There the LNG is regassified, pushed into the domestic gas

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pipeline infrastructure and transferred to households for energy use in house utilities and heating systems (Wang & al., 2013).

China is the world’s largest producer of clean energy from renewable sources, with double the production of the second country, the United States of America (EnerData, 2017). As mentioned previously, China is strongly developing its renewables industry (Reuters, 2017-1) and wants to increase the renewable energies share in its energy mix. China is the world’s leading country in electricity production from hydro, solar and wind power (IEA, 2017), but the percentage of renewable energies in the total energy consumption amasses to just 26% (EnerData, 2017). Hydroelectric power is the biggest renewable energy in China: the hydroelectric capacity is about 320 GW, the second overall in China as shown in Fig. 2.3, with 17 plants across the country and other 10 plants in construction, in order to reach a capacity of 350 GW (IHA, 2017). Wind energy in China has great development potential, with 75% of its land mass and coastline capable of utilizing this resource and a possible capacity of 2380 GW (Wang, 2010) (Wind Power Monthly, 2011). In the “13th_{Five Year Plan” drafted by the National Energy}

Administration (NEA, 2017), the government of China wants to reach a production of 210 GW from wind power, with a current production of 20 GW.

Despite being rich in solar energy and having massive production capacity of solar cells, China’s total PV capacity was slightly above 100 GW, putting it ahead of the world in term of total output; however, when considering the share of solar of the per capita energy consumption it is clear that China is lagging behind, with only 21 Watt/capita (Wang, 2010) (Shahan, 2015). The percentage within the total energy output is a 1.07% (BP, 2017-1).

China’s nuclear power share has increased in the total energy mix, going from 1.1% in 2011 to 2.9%, which doubled the decade average of 12.4% in growth, reaching an increase of 28.9% in 2015 (BP, 2017-1). This share is expected to grow with 20 nuclear reactors under construction expected to join the existing 34 nuclear plants (World Nuclear Association, 2016).

2.4.2 Energy situation

As previously stated, the People’s Republic of China has a systemic resource scarcity that consequently turned the country into an energy-importing state; the resource scarcity/energy-importing nature is not the only challenge faced by the government of Beijing, as energy supply security is also one of the main points in the agenda of Chinese officials. Alongside these two core issues of the energy policy of China, since the early years of the new millennium scientific studies confirmed the relation between heavy GHG emissions, increasing temperature levels around the globe and rising sea levels (Hu, 2016). This third core issue is at the heart of recently

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approved 13th_{FYP (NEA, 2017), in which the Chinese administration defined energy}

development for the next five years. In parallel to the main Energy FYP, there are 14 additional supporting FYPs, such as the Renewable Energy 13th_{FYP, Wind FYP, Electricity FYP and}

others. In the new FYP energy plan, the major change is the contrast between promotion of renewables and the control over coal development. Non-fossil energy sources will account for over 15% of the total energy consumption, while coal consumption will be lowered to below 58% from 64% in 2015. As a solution to the curtailment and to increase system flexibility, natural gas consumption will be boosted to about 10% of total energy consumption, from 5.9% in 2015. This means non-fossil energy sources and natural gas will account for 68% of all new installed capacity in the next five years (NEA, 2017). This 13th_{FYP is the main policy concerning the}

energy industry and other policies will certainly be implemented in the coming years to further develop renewable energy use and to enforce incentives for companies and citizens.

In order to understand this policy, we have to describe and compare the Chinese domestic demand for fuel and the final consumption with the rest of the world to see what the differences are and how can China catch up. In Figure 2.2. we can see on the left side that China’s coal usage is extremely high, compared to the rest of the world. This is where China wants to take the biggest effort, lowering coal usage; as stated in the 13th_{FYP the levels of coal will go below}

58% at least. Linked to this factor, we can see on the right of Fig. 2.2. that most of the energy goes to industry consumption, that is more than double that of the rest of the world. This data however is unlikely to increase, given the fact that China is the world’s largest manufacturer (McKinsey, 2018). Coal usage will however be diminished with new, more effective regulations of output volumes, of days of production, of pollution output, and of capital investment (McKinsey, 2018). Another clear aspect of the Chinese energy industry that comes out of Fig. 2.2. is how low the transportation usage is when compared to the rest of the world: it is half the amount of the world mean.

The Sino-Qatari relations within the framework of China's energy supply security strategy in the Middle East

Graduate School of Social Sciences