 Well good afternoon everyone. Thank you all for braving the weather to come out to hear this what I know is going to be a very informative presentation by Shu. My name is Guy Caruso. I'm with the Energy and National Security Program here at CSIS and we're really pleased to have Shu with us both a key leader of the Institute of World Economics and Politics in Beijing as well as the Center, well as the Chinese Academy of Social Sciences, CAS, which we have have had a strong relationship between CAS and CSIS for a number of years, so we're really pleased that Shu could be with us. He has been one of the leading researchers in energy and economics in China for a number of years and met him while I was at the IEA and been active in the International Association for Energy Economics and a number of other organizations and spent, I believe what, 26 years at the CNPC, China National Petroleum Cooperation, and for the last I guess it's about four years now at the Academy and one of the things that that he and his team have been working on is this Chinese energy energy outlook, which is the first publication of its kind from the Academy and Shu mentioned to me that they work very closely with the International Energy Agency in terms of the methodology and formatting, so I probably a little early to be claiming that maybe this would be the Chinese version of the World Energy Outlook, but anyway, it's the beginning and I think we're all going to benefit from hearing from Shu this afternoon and we'll have about a 30-minute presentation, then we'll go into Q&A and so we're very pleased that Shu has chosen to make this the inaugural presentation of this publication here in the United States and it came all the way from Beijing just to be with us today, and so we really appreciate having just come back from from Japan, I know how you must feel. I mean just arrived yesterday, so Shu thank you very much for being here and for the all of good work you have done at the Academy and we're going to look forward to hearing your presentation and by the way, the extensive set of PowerPoint slides that Shu will present today. It will be available on the website as of tomorrow, so thank you very much. Thank you. Thank you, my friend, Mr. Guy Cruiser for your introduction. Actually, this time to be honest, it's not a good time for me to speak here because my by-clock remains Beijing time, not DC time, but I'm very happy and excited to be here invited by CSIS, Guy Cruiser and his colleagues. Today, I really would like to have done this one. Make my presentation about my report in form is entitled by the World Energy China Outlook. I may leave it to make a brief introduction of the book. First of all, the book is an independent book done by myself and my team member independently. The conclusions, the data are calculated by ourself. Some findings should be different from others and this book I will show you here is in fortunately in Chinese, not in English, but the English exact summary is available from the end here. I provided here. English version of exact summary is good, is bilingual, so English version is here. But in terms of the whole book is composed by two parts. Number one is World End Chance from Chinese Perspectives and the number two is Energy Security from multinational, multidimensional perspectives. According to the two parts, the main body of the book, we have a very well-researched introduction, introduced and explained the nature, the approach, assumptions of our research and also we have database to support our research. Before I am voting my speech on the main points of the research, I would like to say a few words about the title. Because the title, both in Chinese and English, leave this change to to the audience. Because it is not a World Energy Outlook. It's not since the Chinese Energy Outlook. It's a combination. It's a combination interactive outlook focused on China. But we look at China from World Perspectives, vice versa as well, simply because we have a strong source behind the title. That is energy issue in China today. Today are worlds, vice versa as well. So when we look at China, we should have a broader view, global view, to look at China, what's happening in China and implications on the world as well. Today, when we travel abroad, we hear a lot of people talk about China, India, when we deal with energy issues and others. So China seems not only a black box or black swan to the westerners, even for us as well, because it is not easy to be understood well from conventional wisdoms. So we should have a keeping brand mind to look at China. So that's why we need to put the two things together to have an interactive look at China, to see what's happening in China. Try to have a better understanding of the country and its relation with the rest of the world. So currently, World Energy Outlook by IEA or International Energy Look by the EIA and some others, similarly pulled by the energy company or China Energy Outlook, we can find a dozen copies in China, cannot be explained a lot of things. That's why we will work on the issues, we're working on this report. And we have our own approach as well, but similar to some existing reports, now focusing on policy, policy-oriented, because we find the policy issue is an important issue. It's the human factors in addition to market competition, population, technology, some other issues. Policy issue will be number one thing that's important to affect the energy development into the future. So we developed our own approaches, learn something from the others. And our approach is entitled by ECHO or ECHO's Logical Friendly Energy Strategy. This strategy is very well researched before we conduct our research of this topic here, because we find the existing energy policy here in China seemingly covering all things, all aspects we discussed, but some we're still not satisfied, even for example, lots of topical issues are covered like security supply, which is important to the energy consumer like China, production at home and abroad. It's important for the country to go abroad for energy resources, energy saving, exchange, green, low carbon, growth, technological, and systematic innovations. All things are covered by the existing policies, but however, such policies fail to satisfy ecological human expectations simply because of the effect. They are designed to show the state interest, to show the economic growth or GDP growth only, to show the domestic priorities mainly. These are the issues come from, and we have several critiques on the existing energy policies, including but not limited to the following eight points here. For example, energy policies are not systematically matched. Some policies focus on energy production, while others focus on energy use, all serving on a single sector or sub-sectors. Policy concerns on energy utilization and efficiency are weak. Energy policy here in China are short or effective supervision and enforcement. Some many policies are equivocal. Some policies are not in line with those issued by the central because conflict or interests. Some government policies are kidnapped by energy groups, energy big companies. This is almost obvious because a small body of energy regulators here in China. And lastly, the transparency, accountability, and supervision are questioned. So with all these things in mind, we think we should review the energy strategy and find out what we should be emphasized, what priorities of the new energy policy should have. We list the three things here should be important. Number one, which new energy policy should focus on ecological systems and secure harmonious functioning of its parts in order to build up an ecosystem instead of economic growth or GDP growth merely. To make sure human base or human needs should be served and as a core content of the energy policy. And also, we find the energy source in China should be multiple and co-existence. And also we have independent chapters on this issue. The future of the energy for China and for all the world will look like something different from the past. Some major energy source may not easily replaced by others. So co-existence of multiple sources of energy is fitting our realities and the future when being utilized in cleaner efficient way. So we have our own central scenario approach to our research. That is, again, the eco-friendly energy strategies is as our essential approach to support our report. And again, we have a database to support it and this database is very much structured accordingly based on our understanding and research on the energy policies, as I mentioned above. So we also have a set of assumptions displaying some factors we should take into account. First of all, GDP and the population is the main driving force behind and the market especially pricing is important. And plus, subsidies should be calculated in China and also technologies including CO2 emission reduction technology and other technologies. I have some data for this. Technology is very important, of course. We list 10 technologies which is critical, important to calculate the energy development in China. But not well assessed to be honest for the first version or research here. But later on, we will very much focus on technologies and implications on energy. And the last thing is policy. Again, energy policy in China should be not only focused on national interests. Public policy dimension should be factor in as well. So this is important for us to keep in mind as well. And the main finding, again, we have almost 15 main findings from our research. I have no time to go through each of them, of course. So instead, I select the eight of them to have more discussion with the audience here. Number one is MACChance. MACChance is focused on global views, especially energy transformations. For example, we believe conventional patterns of energy utilization are about to terminate it. Hydrocarbon views should be co-exist, not being replaced one another continuously. And natural gas and renewable energy sources should be joined these forces to grow on the stage to reflect higher human expectations and environmental requirements. This is very important for China and for the world as well. When we look at the energy revolution, energy transformation into the future. We have studies on the issues and just skip this one. And structurally speaking or geologically speaking, we agree to some point made by the IEA, especially under its new policy scenarios, energy will be increased steadily into the future for the different types of energy sources, especially for natural gas and renewables. And the fourth or fifth scenario is a separate one, you know, there's more constraints on the growth, but the natural gas and renewable will facing some bigger pressures to be grown up at the faster rate. And of course, China and India will take a big pie almost half of the new energy consumption during our outlook period of time. China, India, if you take a mid-sized into account will be more than half. So this is an important message and our forecast on Chinese energy demand will be growing up like in the same roots as IEA, but at much higher growing rate than IEA. So China will be taking a lead and also India, mid-east and Brazil will be followed. Comparatively speaking, OECD country consumption will be very flat. So demand, in demand side is things moving from developing world to emerging regions. Geologically speaking, it seems it's moving from the Western Hemisphere to East Hemisphere. So its bound demand is obvious. And in supply side, of course, energy independent here in U.S. is reality. And someone say, new mid-east will be informed if taking to Canada, U.S. or North America together will be played a very important role in the 2020 oil, at least oil in North America will account for 25% of the world's total outboard. This is a reality, but this is one part of the story I believe. We should look at existing mid-east, pushing Gulf especially, and outside of the mid-east as well. Together with the new mid-east, the three mid-east will present much closer issues, closer realities, both for oil and gas as well. These two slides I bought from the IEA just represent how important of the mid-east into the future, long term to come until 2030 or 35. So my conclusion from these observations is following. The supply is not only diversified, but also polycentric as well. So mid-east, of course, will continue playing an important role, especially if we look at Iraq. This country will be growing up not only for oil but for gas as well, just second to Saudi Arabia. And some other supply centers will play an important role. For example, Eastern Africa and some other places I just cited here. So polycentric supply is obvious against the eastern demand as well. And natural gas presents the same case, but it more particular presents the polycentric. And plus, because of the changing of the supply and landscape for natural gas in some years to come, for example, 2018, the change pattern will be reshaped. If we take a look at these slides here, some other source from different places to Asia. So we believe in the few years to come, the bias competition will be reshaped, we're coming to the sales competitions. This will be new things and have great repercussions on the competition structure and pricing as well. We should closely look at that and especially what's the meaning to China. And the second point is Chinese demand. The second demand, we have forecast on the energy demand into the future. Our approach trajectory of demand growth looks like this. It's simply seen from the chance of growing at much higher growing rates than IEA. That's 2.23% for the energy consumption growth from now to 2035. But the important thing is to look at the energy mix, especially for coal, will be reduced from somewhere around 70% decreased to the level below the 50%. This is our view and observations and analysis of policy issues in China and what's changing into the future. And power generation presents a similar change as we just showed for the energy consumption. Again, for the power generation, the coal will be reduced sharply as well. Natural gas, as IEA report indicated, we are now entering the golden age of gas. We think it's true not only for the world but for China as well. But look at China closely. The golden age in China will be represented in much more detail and a little bit differently we have seen from IEA's report. Simply speaking, unconventional will play a very important role to support the golden age of gas in China. We present these slides here. We have the data from IEA on China. It seems the chances look like similar but if we look at unconventional, according to definition, all the unconventional, including three types, Tide gas, CBM and Shell. We take the same definition but our calculation is much different, especially for the 2011. Our calculation for the unconventional, especially including Tide gas, will be around 40%, not 10%, simply because for many years Tide gas calculates as part of conventional. But now, especially we use the same definition, takes the Tide gas out of a convention to be a part of unconventional, the production of unconventional total will be much in much higher rate. So around 40%, this is our realities. Actually, meaning we have relatively speaking mature development experience in this unconventional, especially for Tide gas. We have technology, we have experience to develop our Tide gas, but not for Shell, not for Shell. So far, Shell production in China is very limited. Our number for last year is 200 million cubic meters, very small, very small number. This is the things we should closely look at. Even the number, the potential, the resources potential for Shell gas is huge, even larger than US. But production is extremely low simply because we have no history and experience to develop Shell gas compared with US, which have almost 200 years from now, but it's a very short time here in China. So this is the issue. So putting the things together, we believe unconventional will take a very important role. We'll be driving force for the golden age of gas here in China, but mainly promoted by Tide gas and the CBM this year and some years to come before the 2020. So after the 2020, I believe the chance will be continued, but left off a little bit, but continue to go to the year 2035. And at that year, unconventional rate still will be 73%. So the reality is that China entering golden age of gas but driving force behind is unconventional. For the year before the 2020, mainly come from Tide gas and the CBM. So for Shell, we believe we still lack of experience. Even we have similar technologies. For example, horizontal drilling, we have similar technologies, but it means different things. Even we have such type of technology, but we cannot develop the Shell quickly, simply because we still need to develop a geological theory to have better understanding what the specific structure look like here in China. And what the technology package should be required. And what a business module infrastructure should be in place, plus regulations as well. Now all the things not very ready. This is my view on the Shell gas here. Renewable, globally speaking, this is almost everybody all knows things will keep growing. And if we closely look at China, our projection is different. There's a big gap between our projections and IEAs, especially for the year 2035. And we believe the renewable or non fossil fuel in China, the demand in China will be increased to the 15% in 2020. And continue to grow to the 24.5% in the 2035 from current level, a little below the 10%. And this is similar views for the renewable conventional, but limited to the power generation. This is presented a similar, but much more remarkable changes. Dependence, because energy demand will be growing and grow at much faster, higher grades than IEA as I forecast I mentioned. So the falling dependence for, especially for oil and then for gas will be increased. Our number for the oil dependence will increase from now 55 or a little bit higher in last year to the 60% in the 2015, 65% in the 2030 and even higher up close to the 68 in the 2035. And natural gas dependence will be, and now is the first time we have reached one third now, 30% now. And it could be a 35% in 2015 and 40% in 2020, before maybe the decline and to the 24% in the year 2035. So natural gas will be limited, different, not going to the same way, same route like oil. Simply because we still have huge potential domestic supply potential, resources potential to be tapped. And because of this energy dependence will be increased slightly. And take the things into account, I believe the falling dependence will be continuing to force the country to expand its energy imports globally in two dimensions. One is bilateral to continue to strengthen bilateral relations with neighboring countries in particular. And also bilateral as well, to try to set up a multilateral cooperation framework with other parties to create a good environment, protections to seek energy security, not only for itself and for the rest of the world as well. This slide will be skipped. And emission, this is important issues. And simply because our projections for energy demand into the future just showing there, and CO2 emissions throughout the outlook period will be increased. But in the year before the 2020, our projections and our scenario EES simply put this way. EES will be going in the same routes almost, same corridor with IES under the new policies and NPS. But the things will be different after the 2020. So our projection will be higher of course than the 450 scenario of IEA. But much lower than IEA numbers under the NPS and CPS current price scenarios. And especially because our thinking behind our consideration behind is that technology will be played as low but not inverted in full and especially CPS still in pilot stage. But after 2020, the implications, the outcomes will be felt and the industry and the society will be impacted in a good way. So our projection will be in low, keep the download. And as with 450 scenario, it's not possible, not possible. And our projection look like this may reflect in some terms, in some way, the reality we have preceded. And the most important thing again is CO. How reduce the CO is the number one thing. In the year 2020, we should find any way, any type, find a way to reduce the CO simply. May help to reorganize. We should shut down some small CO size, CO production size and have to reorganize the CO companies. So anything we can, we should reduce or remove some CO file plants in the east part in some consuming regions. And later on, we should play technology. So the CO will be reduced, emission will be reduced, play a very critical role. And energy security, again, as I mentioned, the beginning is a special focus. We look at the energy security for a long time, but our conceptions is, for many years, unconventional, is traditional. That is focused on supply. But now, the concept for us is shape, reshape it. Not only we look at the supply for our own needs, we also will take care of our own markets as well. We have to keep our markets stable to provide the energy security to producers, exporters as well. We should take care of both supply and demand. And also, simply because we failed the interactions between China and the rest of the world is so real, so important. So cooperation in multilateral or bilateral are important. So cooperation, it should be a part of our security, energy security. This is very much emphasized, underlined by the leaders and the experts as well. We have more explanation on these issues. And especially for the interactions. We take China, Russia as an example to explain what type of bilateral cooperation will be developed between China and its neighboring countries. And most importantly, we also focus on multilateral. Because, again, back to the source I just mentioned, energy issues in China are world, vice versa. So we should take care of the world energy issue as well. To seriously think about energy governance and global agendas, especially environment and climate changes. In this part, actually, China is doing its own part to get ready to work with the rest of the world. And we actually advise in China in many parts to work with different international, regional and international organizations. Including G20, APEC, SM plus three, BRIC, and Shanghai Corporation organizations. But when China working with existing international organizations like IEA, not become a member, full member. There's no way for China to be a full member of IEA. But China is very active to work with them, especially now become part of IEA alliances. The guess is the other file emerging economy. This is the one thing that reflects Chinese position, Chinese attitude how to work with the rest of the world. At the same time, China very active to work with enabling country and to work with other emerging economies with the framework of BRICs and Shanghai Corporation organization. To share some views on their own issues and the reason they are common issues to the international platform like the G20. So this is the Chinese views dealing with global energy security and how to build up new types of global energy systems. So this is the issue just going through very quickly here. So we have some recommendations for the country as well. The recommendation is very simple. I put this this way. Number one for China should become energy consumption by increased energy efficiency for sustainability. And number two is optimized energy mix. This is very important especially reduce co-consumption for emission reduction. And last thing is enhanced energy security system at home and abroad. Means not only in country level, national level, but global level as well. So this is I have to stop here some main points I just explained and get ready for the question. Thank you. Thank you very much for not only a comprehensive presentation of that very interesting report, but I think some insights into some of the questions that all of us have been involved with these outlooks and trying to project the future. No matter where you go, whether it's IEA, EIA or any of the private sector forecast, China and India as you mentioned and other emerging economies are certainly in the forefront and that certainly was one of the messages that I think your research has indicated. I think there are at least three things that really struck me. One was a much faster rate of economic growth that you foresee in your outlook relative to the IEA. And yet the energy demand was larger but not nothing like the increase that one would have expected with that much of a larger, I don't remember the specific numbers, but you were at least two to three percent points per year. IEA is 1.9 for China. And the other one was a question a lot of us have been asking here is will China, given its resource base on shale, source rock, follow the North American pattern in shale gas? I think your answer was very clearly no that the focus on unconventional will be tight gas and CBM and some shale gas but yet you have a very oppressive growth in the supply of natural gas that leads to one of the other conclusions which was a much lower emissions growth after 2020. And then the other one was the other question at least someone like I have been dealing with because when we met when I was at the IEA my job was to try to bring China closer into the IEA and with very limited success I have to be completely forthcoming in that. But I think your comments at the end were that China wants to cooperate but certainly full membership is not in the cards but through a variety of either bilateral and multilateral and especially an enhanced role in APEC which I think up to now I think China has played a relatively moderate role within APEC in the energy. That's my compression well. I've certainly deferred others and then you see that working its way through other bilateral or multilateral G20 addition to the IEA. But you didn't mention IEF. I was interested in that. So those are my kind of observations that what struck me is and I think it's an interesting way to approach it is to take your perspective on many of these key assumptions that the IEA and others have made about China. I guess I'll have one question because I know there's a lot of other questions is how I mean I know there's a five year plan out now and that's got some very ambitious aspirational goals on renewables and non-fossil fuels as well as reducing coal and has an expansion of nuclear that you have in yours but how influential you think your recommendations will be in terms of actually getting the kind of policy changes and investments that will need to be made by the key players in China including your former employer CNBC on some of these. Obviously you must think there's a very good chance that many of these policy recommendations will be implemented but I just wanted to leave you with that open-ended question before opening up to the audience. How do you see this playing through the policy process in China? I think now energy policy is really under research and reviewed and actually five years plan for energy is very much for these five years very much delayed. Actually it's released last year. These five years actually started in 2011 to the 2015 but the five years plan just released last year means what? Means very complicated. Means still a lot of things and uncertainties cannot be clearly identified and positioned. So the strategy and the policy cannot be generated accordingly. So this is a very complicated issue. Now because the change in the people, change in the organization, it's gradually getting ready. Most important things is several factors. One is we quote, in visible hand this is market, market forces. Another is policy. That means the visible hand. Which one should be played important or critical role? For many years actually policy play a very critical role. This can be explained some development. For example, wind energy growing very fast. This simply because strongly supported by the policy. So the subject like solar and wind almost over invested. Capacity is over. So this is the issues. Now under the new leadership, under the very serious intense debate on the issues and some other similar things, we realize the market should play a baseline role, basic role. Should it be base? And government should be in some degree to directly. So now some approval, some rights previously enjoyed, hold by the government agency. Now it's almost to relax. For example, ANG, approval for ANG plants not subjected to the central planar. Local planar can play an important role. And they have final roles almost. So this is the things is changing greatly. That's very helpful because as we all know, price reform in many of the sectors has got to play a critical role. If the market is going to play a bigger role in allocating. Yeah, market will be placed alone and located, relocated all resources. So it puts the market first. Thank you. Well, let me open up. I think the woman in the blue was the first one to put up her hands. You did not stress Russia very much, but do you expect that there will be a gas deal between Russia and China this year? Hopefully. And we very much are looking for that. As I mentioned in the slide, I don't go into detail. Actually domestic supply of gas will be increased, but not enough. We need to introduce to import a sizable, huge number of the gas from neighboring countries. We really enjoyed a very successful gas shipment from Turkmenistan. But for many years we have negotiated with Russia for many, many years having the finalized years. Simply because the different thinking, different formula gas pricing formulas. But as I know, the gap is quite narrow down now. Quite narrow down. We both realized how to understand the gas supply in Russia. For example, it's better to take into account all the share of revolution in U.S. And also for Russia, they have to better understand China as well as part of Asia. Now we're facing multiple competitions, as I mentioned, sales competitions come in the year 2018. So if Russia cannot catch up, the opportunity may be gone. We have multiple sources available for China now. So I believe it's a very much force to narrow its gap. Thank you. Yeah, Julia knows the rules here. So she actually identified herself in affiliation. I forgot to mention everyone, please do that. Another comment on China Russia having just been in Japan talking about gas in the region, the fact that China has provided some capital upfront as part of this negotiation. I think it's very useful for Russia's ability to develop some of that East Siberian gas. Very important. The woman in front of Julia there. Thanks so much. Lisa Friedman from Climate Wire. Thanks for doing this today. I'm wondering, China, like all countries, is supposed to be developing new greenhouse gas targets now. This year is supposed to be unveiled next year, latest by March or so as part of this process to develop a new treaty, whatever it's going to be, a new global agreement on climate change. I'm wondering, well first, any insights that you have into this process, but also from what you've studied, what do you see as likely? What will China, do you think, be able to put on the table after this intensity target, after its current 40 to 45% intensity target is met? Is an absolute emissions reduction on the table? Is it something less than that? At this point, thanks. What's the specific question? Is the greenhouse gas emissions targets, what would the... What do you think the Chinese will do in terms of whether it's the next IPCC meetings or what? Sorry. What's the... China ready, do you think, for an absolute emissions reduction target? I think that China is very ready. Especially at this moment, if we consider the air pollution here in China, right? Beijing and most part of Eastern China are covered by the atmosphere pollution very seriously. For example, the day before I'm coming here, PM 2.5 almost 500, compared with 3.0 file in Canada. So it's a very serious pollution we witnessed in Beijing, in China. So I think now the country has to be serious about the issues, and we have seen some actions have been taken already. For example, there is a plan, I translate this way, a plan for actions against the atmosphere pollution. This plan released last year. They targeting co-consumption reduction should be down to 65% in the year 2017. This is a plan they made for the country. For Beijing particularly, they try to curb the co-consumption, should reduce to the same percentage, 65%. But not in the year 2017, but in the year 2015, two years earlier. They mean they are very high pressures to dealing with these issues. And in January, the Energy Bureau just concluded their national meeting. They would like to such target should be down by this year. But this year. So this is very high pressures already there, and this country should take all measures, anything they can to reduce the co-consumption. And a big measure will be taken place. We can take two questions, one right after the other, so we can get more in, then Shu can answer them both. First the woman in the, okay, sorry. Hello, my name is Eric Sander, I'm with the Department of Energy. And I'd like to know something about the status of the Chinese Methane Hydrate Program. Have you surveyed the East and South China Sea? Also, have you extracted any hydrates from the floor of the ocean yet? And the woman behind the, we'll do two questions, so we can maybe get more questions in that way. Good afternoon, my name is Rosemary Seguero. I'm the President of Seguero International Group. Thank you for your presentation. I come from Kenya, from Africa. What relationship or business relationship do you think when it comes to energy and cost with Africa? And what policy would you put in place looking at that relationship now that Africa is coming up with energy, solar and cost? What would be the relationship and the policy toward looking at corruption, transparency of the oil and cost in Africa? Thank you. Hydrate. This is a big issue. I like this issue. It actually is a sign of African relations in any sector, for example, which I'm very focused on. I have independent research on these issues. I believe such a cooperation with China in early France, including energy. Energy may take a lead. For example, oil, for example, China coming to Africa for our resources. We account for many things, accountability, transparency issues. These things are quite new for us, especially when we're working at CNPC. As an oil company, we will come into our destinations to build the oil industry. Our module may seem different from Westerns because we build the industry from half-chain, middle-chain and down-chain. We take an integrated way to build the oil industry. So then before it's separated. It's a very successful example. But the things we witnessed, we encountered in Africa much more go beyond of companies, imagine. Because the company is not very familiar with such environmental issues. But now, really, they get educated. They find out how to deal with such issues. Number one thing is social responsibility. These things should be taken very seriously. For many years, social responsibility is only taking as simply a report. What I have done for the society, something like charity issues. Now, as I talk with my former colleagues, social responsibility is not charity issues. We should take it very seriously. Similar like HSE. HSE, Healthy Safety and Environment. This is a corporate system. We should build a system inside the company. So I believe social responsibility will be in the same way like HSE. This is something a company can do. And also beyond the company, I believe the government is getting ready how to deal with this sort of country in Africa. This is very much a serious issue. Not only energy issue, but political issue, diplomatic issue as well. I think the relations are moving right away. Such cooperation will be strengthened. I have done some cooperative research on the issues. One is show, experience in Nigeria. Another case is CNPC in Sudan. If we compare the two modules, we will conclude something different. You're learning from experience, huh? Yeah. Your issue is hygiene in the marine, for example, South China Sea. I'm not very focused on South China Sea or the marine issues there. But South China Sea is a very important place. There are lots of political issues over there. First of all, back to resources. I don't think there is a very strong research or geological survey over that period, that process. So everybody, when they come to research, the information is very separate. There's no authoritative research to support some comprehensive research. And secondly, you mentioned hygiene. Hydrogen is a new energy source, actually, is the future of energy. Very recently, there is a team, as I know from the media, a team, international team led by Chinese scientists, just concludes geological activities in South China Sea. This is the very first activities, first things over there, conducted by international teams led by Chinese scientists. This is the place, I believe, there is some potential in South China Sea. But at the same time, hydro, actually, some other places, for example, Tibetan, there are some rich in hydro as well, as well. But it's quite take time. This unconventional will not become reality. Ed Chao and then in the back. Maybe start there since... Honored guests first. Chris Flavin with World Watch Institute. There's been a dramatic, unexpected, five-fold increase in the domestic solar power market in China in the last year. And you combine that with the fact that you already are far and away the dominant producer of solar modules and have helped drive down the global price of those modules by 75% in the last four years. I mean, these are sort of extraordinary developments. And interestingly, they're driven by a part of the energy economy, a small part of the energy economy, which actually is in the competitive private sector, unlike most of the energy industry, which is in the state-owned sector. So I'd be interested in your view in terms of what this portends for future development. I mean, if you can have a five-fold increase in one year, I think that would potentially blow away all of your projections for 2020. Yeah, in terms of solar, right? So far, the solar production output is very little compared with wind and hydro in terms of power generation. The size is very small, actually, in terms of the number. But we forecast that the growth into the future for the solar will be very fast. My number may be over 100%. 140, I believe. They will be because they're encouraged by the policy. As I mentioned as renewable, we believe the hydro will be increased steadily, but not look like this way, increase sharply. So wind and solar will be two-fourths after the hydro. So wind will take the lead first of all and followed by the solar. Why solar will be increased so fast because it's encouraged by policy and small size now. And also we realize the solar sector should be supported, should be open for the private competition, not dominated, because we need to develop this solar sector in some local region, much required by the local communities. Why is solar and wind growing so much faster than nuclear in your projections? Nuclear is a very specific issue. I believe nuclear will resume under very strict safety conditions. But the growth will be coming up. But the solar is quite different from nuclear anyway. It can be open for private competition. And already some private companies actually take a lead, actually take a very critical, important role in solar sector. Large companies, state-owned companies, they only have small share in solar sector. That's a big room for private companies to grow up. Ed Chow, then we'll take a couple more together after Ed. Thank you very much, Dr. Xu, for a very, very rich and comprehensive presentation. Your report will no doubt generate many, many days of study by some of us. And it will generate a lot of questions, but I will limit myself to just one. Your forecast, as with other Chinese forecasts I've seen, suggests that imported gas beyond 2020 will be more or less flat. Very little growth in imported gas after 2020. I guess that generates two types of questions. One is, if you want to sell to China, you better sell gas to China now and not wait until later. But a lot of the assumptions on tight gas, CBM growth and so on will require pretty difficult structural reform in China. I guess my question is, if those unconventional gas production targets are not met, what would China do then? Would it then continue to increase gas imports, either pipeline gas or LNG, or would it turn to other energy sources to fill the gap? Yes, you mentioned very important issues for further reform, no matter economically, for corporate reform, pricing reform. Reform is very much required now, especially for gas. As I mentioned, the future of gas is very much promoted by unconventional, not conventional. Convention will be going like this, unconventional going on. But unconventional is different from conventional. Similar like oil and gas. Gas is not similar to the similar sector like oil. Conventional, even as by nature is the same, is a natural gas. But unconventional should be developed under different framework, different systems. This is the issue we should have a better understanding of the unconventional. Now we should make a system ready. Now it's not very, everything in place, this is a reality we needed to know. So reform is required, it should be placed. If such reform failed, I think we should think otherwise, differently, absolutely. Because the gap still is there for natural gas. So the import will be increased. This is the things that will answer your questions about the reform. Yes, back to the growth change for natural gas. Yes, we see the growth will be obvious before the 2020 and leave the left off thereafter. Simply because now we have several projects working on domestically and internationally. Internationally speaking, especially in neighboring relations with Central Asia, for example, we probably will double our import from Central Asia, especially Turkmenistan plus some additional source of gas from Uzbekistan and Kazakhstan. So the total amount of gas import to China will be double. So this will increase our supply very sharply. Thank you. We started late so maybe we can run a little bit over. Maybe you take in the back, yes, you and young lady here and then the third one there and take three questions and then I'll shoot it to answer three of them consecutively. Thank you very much. I'm Hirakutsu. I'm a visiting scholar from Japan here at CSIS. I'm interested in your policy recommendations, especially the second one to find the best mix for energy resources. I'm curious to know whether you have done any study to find the best or optimal mixture from China's perspective rather than forecasting the future energy consumption. Thank you. What chance? No? Okay, I see. Hi, I'm Ayaga Jones from Energy Information Administration. If I remember correctly, one of the assumptions you made actually the very first one you talked about is by 2020 clean coal technology is widespread in China along with the coal gas switching. You also talked about carbon capture and storage being one of the five technologies prioritized. If I understand correctly, these are your assumptions. I'm just wondering if you could define for us how you define the clean coal technology in your projection. Do you mean carbon capture and storage or just high efficiency steam turbines and ultra-supercritical coal plants or the combination of both? And also can you give us an update on the carbon capture and storage development in China in terms of policy support and support from senior government officials or project updates? One final on this group. Then we'll ask you to answer those three. Edward Dellman, Center for New American Security. You mentioned in the report that you see offshore production building up I think somewhere around 2018. How do you see that sort of production building up specifically in the East China Sea and South China Sea regions? And how do you see production there affecting the security situation in both regions? Or conversely, do you see production there maybe helping strengthen bilateral relationships or multilateral relationships with ASEAN or with neighboring countries who are also heavy energy importers? Thank you. That's mixture clean coal. Clean coal, CCS and energy mix. I forgot the first question about energy mix. What's the best or optimum energy mix for China? The best one from my view actually is the energy mix in the year 2035. That is the best one. Simply because coal reduced to below 50. Means coal still will play an important role because of Chinese reality, the huge coal resources. Coal will be played a major role but not at the high rate like today's, you know, 70%. There is no room for other sources of energy to play, to grow up, you know. Simply because coal is so dirty, you know. So there's no technology followed up to make the coal cleaner. Such technology very much required but the cost is high as well. So the best solution I believe you simply reduce the coal consumption. Reduce is the percentage. This is the best way. So the easy way to optimize the energy mix. So the best level should be below 50% and increase natural gas to 40%, similar to gas. And then renewable should be 24%. Such a structure should be workable, look nice to China. I think so. Maybe clean coal fits in with that. Yeah, clean coal is a very related issue actually. Clean coal is another way, another solution to make the coal cleaner, right? We cannot live without coal anyway, right? So the right things we are working on now I would like to mention is coal to gas project. This is something we are working on heavily now. For a few years ago, such a project is very limited by the policy. Now it is open. Government encourages local authorities to develop the coal to gas project. Now have several projects, pilot projects going on. I believe this may be a way to test which technology and solution will be worked out to make the coal cleaner. Because now such a business approach still costs much, especially coal itself and water as well. We calculate like this, you know, about the cost. One cubic meter may cost three times coal, ten times water. So this is not affordable. So the solution is good, but we need to fix it. You know, make it cost effective way. So another thing is CCA is of course important. CCA is now still not fully developed, generally speaking, not fully developed. Some debate still is going on. Is CCA's or CCU utilization? Which one is the best? There's some debate on the issues. As I mentioned on my slide here, I list ten technologies including CCA's. But we just counted, taken into account but not very assessed in detail. These are things we will continue to working on. And the last thing is South China Sea production. South China Sea, East China Sea, South China Sea production, all the social development and its relations with security. This is something like a chicken and egg, you know. I believe some security framework is precondition. It's pretty much so as we realized. Previously speaking for the authorities, for the leaders of China, they would like to have economic cooperation. Try to put the economic cooperation first and we will benefit them, followed by some political cooperation. It seems not simply put this way and accepted by the different countries, the neighboring countries. I believe some type of security arrangements is must, is precondition for some specific cooperation. Without security arrangements, nothing could have happened. Even we have some choice, some drilling in South China Sea and East China Sea. But it is only attempts, political attempts, meaning nothing economically. So now we have to take realistic attitude to the issues. One thing we should have things to discuss already. First of all, we take South China Sea for example. Taiwan and mainland China should be closely working together on the issues. And then we should work with neighboring countries bilaterally. So these things should be focused on. Something we realized, some mechanism should be set up. Is there one final? I saw a hand over here. Yes, gentlemen. Take that, the final question. Thank you very much, Mr. Xu. My name is Paul McGuire from the Capital Research Center. Earlier you discussed about how China has great immense, has immense reserves of shale gas, if I'm correct, but currently there are problems in developing them over the long term. I simply wanted to ask for a possible elaboration, especially in which regions of China in particular have potential with shale gas? China has actually shale gas, shale formation is placed across the country actually. Now existing resources are very much concentrated in the southwest, in Sichuan Basin. This is a place very much focused on, heavily invested by the Chinese company. And the foreign company is close to look at, and some companies like Shell are working with CNPC in several projects in Sichuan as well. Last year I visited the sites, and they're both working very well. Because Shell has a huge experience in the US, they can shift their experience to China, but they realize different structures, different packages should be tailored in China. So the opportunity is there. I believe the opportunity will be available in wider manner compared to last year. Simply because now we, and some experts realized, there's some mistakes I would like to say. We learned something from the US, that shale gas is very much open to private companies. Private companies play a key role in the US. China should have done the same. But now we think in China, there's no similar type of meeting, small and medium private companies in the US. So we now may encourage the major, big company play a big role. So they take a lead, and some private companies, small company can follow, working together with big company. In this framework, foreign company can provide some service. So service industry will be open, will be the place, will be area for cooperation into the future. Thank you very much. Please join me in welcoming Shue.