China's Energy Sector: Development, Structure and Future

By Michael E. Arruda Partner, and Ka-Yin Li, Legal Consultant, Fulbright & Jaworski LLP, Hong Kong

The energy challenge in China is formidable. The country's demand for energy grew by nearly 20% in 2002, and China now comprises more than 10% of total world energy consumption. China is the second largest consumer of energy in the world after the United States, having recently eclipsed Japan. At the same time, China is the world's second largest source of carbon dioxide emissions, which is largely due to its reliance on coal for nearly 70% of its total primary energy supply. As China's energy demand grows, its indigenous supplies of energy are falling behind. The country has been a net importer of oil since 1993. Various sources suggest that, by 2020, China will need to import up to 70% of its crude oil requirements and 50% of its natural gas. The challenge is clear: China must find additional, clean sources of energy, whether from indigenous sources or overseas, to satisfy its rapidly increasing demand. In addition to the resources challenge, legal and regulatory challenges must be met.