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Deepen International Cooperation and Conform to Pattern Changes

  

Keynote Speech in the Second China International Oil and Gas Trade Congress

(November 21, 2013 Shanghai)



Respected Vice Mayor Zhou Bo,
Distinguished Guests,
Ladies and gentlemen,

Good morning! The Third Plenum of the 18th CPC Central Committee concluded last week has shown the direction for China to comprehensively deepen the reform at a new historic starting point. At such an important moment, we celebrate the opening of the Second China International Oil and Gas Trade Congress. On behalf of the Chinese Ministry of Commerce, I would like to extend my warm welcome to all of you present here.

Over the past year, the deepening of global energy reform has promoted the shift in global oil and gas trade pattern. Countries across the globe, be it traditional resource countries or emerging supplier countries, developing countries or developed ones, all realize that such a shift has on the one hand broken new grounds, and on the other hand created new challenges. This is no exception for China. It is precisely for the purpose of promoting international exchanges and cooperation, and seeking a win-win pathway in oil and gas against the backdrop of such profound changes on the international energy landscape that MOFCOM and the Shanghai Municipal People’s Government jointly set up and nurture a platform such as this China International Oil and Gas Trade Congress. I hope that all the participants here could have thorough discussions on the hot topics relating to global energy industry, and explore ways to strengthen cooperation and respond to changes in the global energy arena, and come up with forward-looking and constructive ideas.

Energy serves as the material foundation of economic development. The great accomplishments of the 30 years’ reform and opening up could not have been achieved without energy as the basis. In 2012, China’s primary energy production reached 3.33 billion tons of standard coal, ranking the top in the world. Its energy consumption totaled at 3.62 billion tons of standard coal, over 90% of which was self-supplied. With the adjustment of economic structure and improvement of economic quality, China’s energy intensity has decreased. During the period of the "11th Five-Year Plan"(from 2006 to 2010), China’s unit GDP energy consumption has dropped by 19.1%. An energy consumption that was growing at an annual rate of 6.6% has powered the economy to expand at 11.2% per annum, saving 630 million tons of standard coal. Chinese per capita energy consumption has just reached the world average, which is only one third of that in developed countries. Going forward China will push on to innovate ways of energy production and energy use, reasonably control the energy consumption aggregate and energy intensity, adjust energy structure, and embark on a green and low-carbon development path.

China is still in the middle stage of industrialization. So even if its energy efficiency were on par with world’s advanced levels, there would still be a sizeable amount of energy required to support a population of 1.3 billion. At present, annual domestic crude oil production basically maintains at 200 million tons, while this year’s crude oil consumption is expected to exceed 500 million tons; natural gas production has been a steady growth with a tight balance between supply and demand and a ratio of dependence on import expected to be around 32%. China’s steady growth in demand for imported oil and gas will continue to serve as an important stabilizing force in global oil market. We believe that a more stable, safe and sustainable energy market is conducive to all the energy producing, consuming and trading countries.

Looking the world over, the oil and gas markets are undergoing some profound changes. In terms of supply and demand, the energy revolution, represented by shale gas fracking in the US, is bringing profound changes to the supply and demand pattern of world's oil and gas industry, with a stronger tendency for production to be shifted to the west and consumption to the east. In terms of the price-forming mechanism, multiple factors other than supply and demand fundamentals are having a growing impact, while financial and geopolitical attributes are also affecting the price fluctuations of oil and gas. In terms of the resources and the environment, to cope with climate change, reduce the unit energy consumption and cut back on pollution emissions has become issues of common concern for all countries. In terms of energy security, traditional and non-traditional security issues are entwined and compounded, making the international security environment more complicated in the future. Therefore, the world’s energy pattern is undergoing the “restructuring of market structure”, “restructuring of consumption structure” and “restructuring of security and the environment”. We have both opportunities and challenges before us, all of which require us to strengthen cooperation and adapt to changes. I would like to hereby share with you our observations.

First, the market should play a decisive role in the future of oil and gas market in order to minimize the impact of non-economic factors. With the formation of oil-producing multi-centers, the oil-producing countries in the Middle East will shift their focus to the Asia-Pacific market, especially the East Asian markets. The mutually-beneficial, interdependent relationship between the two sides will further deepen. It is necessary to adjust and improve current practices that are inconsistent with the supply and demand, while the fairness of the price of oil trade should be better reflected. Let’s look at natural gas, the demand for adequate liquidity of natural gas has increased significantly in the globe due to changes of supply and demand, and there is a huge price gap among the three markets of North America, Europe and Asia, with the price of natural gas in North America being only 1/3 of that in Europe and 1/4 of that in Asia. The pricing mechanism for natural gas trade should be more reflective of the reality of the changes in market supply and demand. We believe that promoting trade liberalization of oil and gas, achieving globalization and diversification of energy supply and maintaining reasonable energy prices is in line with the interests of both energy producing and energy consuming countries.

Second, the future oil and gas market should be a market in which all countries coordinate sufficiently and share responsibility. Currently, the aftermath of the global financial crisis still lingers, while social unrest in certain regions is not yet over. Energy security remains one of the core issues of international geopolitics. With the rapid increase of energy self-sufficiency in North America, the pattern of oil and gas resources and market around the world will change, adding new uncertainties to the relationship between the main energy-importing countries and traditional resource-rich regions. Emerging market countries are more concerned about the stability in the resource countries, making the energy security situation more complicated. We believe that it is necessary to further strengthen cooperation, and give full play to the role of multilateral coordination to solve the hot issues and regional conflicts in the globe in accordance with the spirit of the UN Charter. Meanwhile, it is necessary to develop through consultations and dialogue fair, reasonable and binding rules, and build multilateral coordination mechanisms including forecasting and early warning, financial regulation and safe operation of the energy market, so as to make the global energy market more secure and stable.

Third, the future oil and gas market should be clean, efficient, green and sustainable. Over the past 10 years, the average annual growth rate of global carbon emissions was 2.8%, higher than the average annual growth rate of primary energy consumption, which was 2.6%. Furthermore, according to statistics by BP Energy, in 2012, consumption of oil and coal would maintain the absolute dominance in world’s primary energy consumption, accounting for 63% of the total. The sustainable economic and social development of the world is facing such constraints as climate change, the environment and resources. Enhancing clean energy and the utilization rate of renewable energy and developing low-carbon economy has become a global consensus. Of course, the ability and responsibility of each country should be different due to their different stages of development. Developed countries shall give more support to developing countries in capital, technology, talent and building of modern energy systems, while developing countries should, on the one hand, make more efforts to mitigate emissions, and on the other hand provide a broader market to developed countries in the process of building clean, efficient and green energy systems.

Ladies and gentlemen,

The Third Plenum of the 18th Central Committee has just passed the Decision of the CPC Central Committee on Issues Concerning Deepening Reforms, which has produced a blueprint for China’s reforms in such areas as economy, politics, culture, society and ecological progress for the next decade. In the future, we will continue to promote the reform and opening up in oil distribution, maintain fair market access, improve the centrality of the market, safeguard energy security, stabilize market supply, and accelerate the establishment of a unified, open, diversified and efficient oil distribution system. Currently, MOFCOM is working with relevant departments to research on certifying, in the principle of optimizing structure and eliminating backward production capacity, crude oil processing enterprises that meet the quality, environmental, safety and energy standards with the rights to import and use crude oil, in accordance with the spirit of the Opinions of the General Office of the State Council on Promoting Steady Growth and Adjusting Structures in Foreign Trade.

China (Shanghai) Pilot Free Trade Zone was established officially on September 29. Vice Mayor Zhou Bo just briefed that Shanghai International Energy Trading Center will be set up tomorrow, while China's first crude oil futures to be floated is also under steady preparation. Such is a major measure of China to substantially promote trade and investment liberalization, actively participate in international energy trading, and build a crude oil trading platform for the Asia-Pacific region so as to ensure market stability. We believe that China will usher in a more open, fair, orderly and dynamic energy market.

In closing, I wish the conference a complete success, and wish you all the best with your work and stay in Shanghai!

Thank you !

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