 Wel, mae'r cyffinio llynigau llynig yma, sy'n radiol yn ffordd yn ei rhaid o'r wlad o'r dyfu o conferences a'r grannu. Mae'n hyn yn ymddir yma yn y dyfodol. Mae'n altru'r ffordd yn dkelifrhyw. Mae'n gyffinio grannu llynigau llyfrion rhaid o gefyddledigol yn ffordd. Mae'n unrhyw amser gyda ymddir yma yn y syniadol. Mae'r rhai o'r medd journalists yn ffordd yma yn y bydd gyflyniadol Ysbryd yn yng nghymru, ond y gallwn gwneud hynny yw'r cyffredinol. Rydyn ni'n gweithio ar y sector cyfnod oeddi. Rydyn ni'n gweithio ar y sector cyffredinol a'r cyfnod cyfnod cyfnod cyfnod cyfnod cyfnod cyffredinol. Yn ddiddordeb, os y fwyllgor, gan y ddechrau atrach o'r SNUK, Rwyf ni'n meddwl am ysgrifennu Gwysigol Cymru, yn cyfnod cyfnod cyfnod cyfnod cyfnod cyfnod cyfnod cyffredinol. Tyfnodd hyn yw a'r ddwellstaf sy'n ddigon cael gwylwyr, chwy'n gallu hynny, a ridei'n ddweud hynny. Yn hyn, mae gen i fynd i ddweud ymdweud y bybni yn gweithio'r strategiol iawn yma, ond rwy'n i'n ei bwysig arno y mynd fel yw ddweud, y twyd yn rwy'n dechrau'r hwn o'r mynd i'r lleidydd y wlad cymaint, felly rydyn ni'n no fle i ddim yn ei gweithiau ac wedi consumption in blue production in red over the last 30 or so years and you can see it was rising steadily since the early 1980s when the economy started to open up and there's been a huge acceleration in the last ten years. And this was driven by a massive investment boom in heavy industry, an infrastructure, steel, cement, the plate glass and chemicals. You can also see that the gap between consumption and production is growing however despite that gap which is obviously satisfied by imports. Some 85% of China's energy use is still satisfied from its own resources. Now this table is, I put a lot of detail on here in order to show a general pattern and the key thing is the first slide as it were. This slide here. That despite struggling over 20 years or so, China is still highly dependent on coal, 70% dependent on coal for its primary energy supply. Oil has stayed roughly 17-18%. What has grown and is growing is natural gas, now up to 4%. Hydroelectricity stays at around 6% and that just depends on how much rain there is. At the bottom just starting to appear is significant on nuclear and renewables and as I was explaining at lunch you hear about the huge scale of China's wind farms or whatever but everything that in China that looks big is actually small. Only that's including the nuclear there. So if we look at the oil here we have from 1980 to the 2011 total oil consumption in the top line and in the lower line the flatter line domestic crude oil production and these two lines crossed in 1993. So 1993 was the big year that everybody talks about when China became a net importer of oil. Before that in the 80s and the 70s China was one of the biggest exporters and I have a book written in about 1980 where an American is frightened that China would join OPEC. Anyway, those days are past. China is now firmly with the European Union as one of the major importers of oil and we see in the red line, I'm colourblind so if I get the colours wrong just imagine what it really is. But most that they have huge refinery sector so essentially they are importing crude oil and refining it and that is part of industrial policy in order to build their own refining business and employ lots of their people. But this gap is large some 56-57% of China's oil needs are now imported and that is going to continue growing for the foreseeable future. If we look at natural gas we've seen that really this is a natural gas production in China has only started to pick up really in the last 12 years. Back in the early days there were a couple of parts of China that produced gas and I used to work for BP in China in 1990s and there was no point in producing gas in China you wouldn't get any money for it nobody was interested they just wanted the gas to make fertilizer with. This then started to change in the late 90s and as you could see they've been exploring they aren't their production and the blue line is going up very rapidly, their consumption is going up more rapidly and they are importing increasing quantities of natural gas and we'll come back to that. So what is the oil used for? This is a projection from the IEA and really the big message here is the green which is transport so it's transport that is going to drive the future oil demand in China unless there are radical steps to move away from oil to electricity or to gas. In the gas sector the picture is more confused the priority in natural gas for China is not electricity it is city gas and we were talking at lunch about pollution and one of the things they have done is to get rid of the particularly in north China the district heating systems that were fueled by coal and replaced them by natural gas and again industries are more and more using gas. So city gas industry and the power sector is starting to pick up but the problem with China's natural gas is that it is all expensive there is no cheap gas in China and so if you come to the power sector the fuel of choice is coal because it's about a third or a quarter of the price as of gas. So we've looked back China can see the challenges more and more gas imports more and more oil imports more and more energy demand for all sorts. So here's slide and well obviously today we're focusing on the right hand column but we still need to start on the left hand column to understand what is China's domestic energy strategy and you know rather like America it is let's maximise production of domestic resources whether that be oil or gas or coal or hydro or whatever but particularly when it's oil and gas it's oil and gas reserves. Maximise the refining capacity as we've already seen build the pipelines to move oil and gas around the country have ports for importing build storage a lot of oil imported into China is going into emergency storage for the first time. They've been working on coal to liquids because they got all this coal they've been working on biofuels but both those programs have really sort of slowed down three or four years ago because the government realised there were many environmental concerns with coal to liquids and competition with food when it came to biofuels. They've been working on hard on fuel consumption standards of vehicles and emission standards but these aren't always being followed. There are growing numbers of gas and electric vehicles in the cities and rather late in the day some of the cities are working on urban mass transport systems but at the same time anybody who's been who's been to China here right okay you've all been to the big cities and sat in traffic jams yeah everybody who's got the money buys a car yeah so so this is a real problem the promotion of the private car sector the disappearance of the bicycles etc etc air travel is also growing hugely in China fuel pricing now i've always had this sorry it's gone very low the line here i've always had this here from probably 10 years ago on this slide it does get updated but but it's now here for a different reason actually the price of a litre of gasoline now in China is higher than that in the USA so the government is starting to push up the the oil price to make people pay for it and to make people think before they use it so that's the domestic policy the overseas policy we're going to go through a bit more slowly and i've got slides to illustrate many of these so i will just highlight and then we'll look at a bit more detail diversifying imports and i'll have a graph that shows how China draws in its oil imports particularly and gas imports from all over the world coming as it does as an economy that was once planned where the economy is driven by the government China prepares prefers government to government deals long-term contractual relationships rather than reliance on spot markets and our overland import it feels insecure depending as it does on oil coming through the south and the east China seas and so it likes overland imports and i will show you a map of that in a minute then we move on to the overseas investment strategy which again i shall come back with by their national oil companies and then something that we don't talk a lot about oil field services and construction i had a number of students in the major oil company petro china cnpc and when it was commercialized and corporatized in 1998 they had one and a half million employees two or three years ago i asked my ex-student who's a senior manager how many do you have now he said 1.6 million and i said well wasn't that rather against the aim of the commercialization and he said yes but these oil field service and construction companies have been hugely successful and so they are all over the world even in countries where the chinese oil companies are not then we've got attracting inward investment from foreign national oil companies and we'll come back to how that works other particularly with companies from oil rich countries loans for oil you may have read over the last few years that with strategic partners such as russia or venezuela or kazakhstan or angola the chinese government through usually through one of the state-owned banks will lend billions of dollars to countries in return that is then paid back in oil and the biggest of these have been in russia where they paid lent 25 billion in one go and the return was the construction of a pipeline oil pipeline from russia to china with the oil that then goes through that pipeline debt relief to places like iraq diplomacy aid and a whole raft of other strategies that support either deliberately or not through intent this overseas oil policy so i'm going to illustrate some of these points with pictures now if we look at oil the details of oil trade we see the top line the crude oil import and oil product import are much flatter line here and you see at the bottom we we do they do have crude oil exports but they suddenly stopped in the late 90s when they had an export contract with japan and when their imports were growing they just cut that contract and said right that's finished they export product why for two reasons one their refineries make too much gasoline and not enough diesel so they have to import an export to get the balance and second oil product prices are controlled in china as i just said the price is there but it's set by government and sometimes if the oil price inside china doesn't keep up with the external price if you're a refiner on the coast what do you do you want to sell the stuff in order to get a decent price now if we look at the sources of china's crude oil imports over the last 16 years there has been a dramatic change um back in the 90s essentially Asia Pacific that's indonesia and melasia were the main sources together with the middle east and uh melasia and indonesia's export capacity has diminished indonesia is now an importer a net importer of oil and so china has had to move to other places the middle east stays at about 45 50 percent um africa is the one that has grown hugely um particularly west africa and sudan eurasia is russia and kazakhstan two neighbors where the oil comes in through pipeline and the americas mainly venezuela and colombia so you know there are about 30 or 40 countries now that supply china with crude oil if we look at the future oil demand or oil import requirement what we see these the world energy outlook and probably ed chow shared some of these with you last week um we're at 2010 here we've got sort of high demand or lower demand depending on how green they're going to be and here is production okay so i don't know where production will be in 30 years time but uh the geology is is not good and there most of their fields are depleting so china's oil production is unlikely to go up it's most likely to go down and so this gap between production here and future demand is just going to get bigger at least over the next 25 years or more unless there is some radical um measure to deal with transport policy if we look at gas imports essentially there was no imports until 2006 when china opened its first liquefied natural gas plant in the southeast and so they've been building more and more lng plants and will continue to build and the first pipeline is from turk menistan and if you look at the geographical regions they get their gas from obviously the cis former soviet union is the turk menistan pipeline and then you've got southeast asia australia for natural gas very important in indonesia some gas coming from nigeria gas from gata in the middle east and a bit of gas from from north america so again with with gas they're importing from all over the world and will continue to do so and and with oil projecting future gas demand and future gas imports is very difficult and the i was going to show the ia forecast but it doesn't make sense so i'm not showing it uh the problem with gas is that the the supply and the demand because of the infrastructure needs are much more closely related and therefore highly dependent on policy actions by the chinese government okay so there's no point too much in in trying to predict what it is and here we have projections of future gas imports lng pipeline imports all you have to notice is that the numbers are big and there's a huge range of estimates okay so basically we don't know underneath this is one big unknown that we were talking about at lunch which is the shale gas you will have heard of how in north america uh there's been this shale gas revolution of through horizontal drilling and fracturing you can bring gas from shales where you didn't weren't able to before and this has revolutionized not only the us gas market but will change the global gas market china has a favourable geology uh i think the big question is will the political economy of energy in china and will the regulations and administration allow that gas to be exploited quickly or not to date the signs are not too favorable but they're not really unfavorable i was in indonesia last week looking at coal bed methane and they're it's really unfavorable so i think probably in china we will have a slow pickup but they will get there in the end but you know so we got huge uncertainties in china's call on international gas markets the only thing we do know is that it will like with the oil markets it will become a major player in global gas markets and in regional gas markets here's a map to illustrate some of these factors what do i press to get a light rather than me the middle one middle one right i can't see it must be i can't see it because because okay but if i can't then i can't write in the right place it's obviously an obscure colour so right i'm going to have to move it's red a disaster okay so you've got china here um i've done it schematically but the first major pipeline coming in was from kazakhstan from near the kasbyn sea bringing oil into china that's a long way it's got to go even further to get over to central china some of the oil in this pipeline also sometimes comes from from russia um then you had the turk menistan gas pipeline that comes from turk menistan across Uzbekistan kazakhstan and then into china and then goes all the way to east and china through a series of pipelines uh west to east pipelines here there is also now a russian oil pipeline bringing oil actually from west siberia into northeast china this later this year two pipelines will open across myanmar burma one is bringing gas exploited in myanmar produced in myanmar into southwest china the oil pipeline will essentially bring any oil from any ship that comes in here across and therefore avoiding the melaka straits so china has over the last six years built up quite a substantial strategic network of pipelines that reduces its dependence on the dash lines which are the sea lanes of communication which brings oil from the middle east or from west africa through the melaka straits through the south china sea uh even through the east china sea up to the major import terminals along the east coast the yellow dots are sort of symbolic indications of where the liquefied natural gas plants are bringing in gas from as you've seen all over the world what you don't have is a gas import pipeline from russia they've been talking about it for not 20 years give them time give them time the russians are not easy to negotiate with neither of the chinese and anybody who's still looking at the slides you'll be thinking what are the black dots they are ports being built or built by the chinese uh these two are on chinese territory the rest are not in myanmar in bangladesh in shrillanka and in pakistan these are large ports that could necessarily be used by a future chinese navy to protect its sea lanes of communication we now move to the overseas investments because this is often what makes headlines they started in in the early 90s as china was just becoming a net importer of oil these were small small projects of little significance except it gave the companies a chance to try out their skills and learn about working overseas in 1997 you then had some big onshore projects sudam which you will have heard about uh kazakhstan iran and venezuela gradually in the 2000s they started to widen their scope uh deep water tar sands lng and some active merchant acquisitions buying up smaller companies 2008 9 marked again a few big investments and it's interesting the global recession meant something quite different from for china's oil companies than it did for our oil companies i met one of my say uh ex-student senior manager in cpc christmas 2008 and he said i said to him what does the recession mean to you he said this is a great opportunity and you can see this from 2009 uh china's been on a on a shopping spree with you know deals worth billions of dollars at a time buying up major assets mainly in the americas for the first time and uh buying from western companies who need like bp i used to work for that needed to sell either because they'd had a ghastly accident in the Gulf of mexico or otherwise they needed some more cash flow and so you know billion 10 20 i don't know 30 a 30 billion or so has been spent in the last three or four years mainly in the americas by the two or three top chinese oil companies including in britain petro china buying a a refinery up in gragemouth and senoc buying next end which makes it the largest oil producer in the uk north sea and syno peck buying canadian talisman that also makes it the significant player in the north sea getting big in australia as well so they stopped investing new big projects in developing countries or in you know countries uh which are pariah states if one wanted to use the word they're now moving in in big time the quantity of oil they produce 64 million tons something over a million barrels a day they produce from these overseas fields uh which is it's about 20 20 percent of their total domestic production so it's significant but what's important to know is that oil doesn't necessarily go back to china okay most time the companies sell it where they can get the best value for money here is a summary and you know just feel it you know need to read it as to the number of countries that these companies are invested in in bold i've highlighted my judgment of where where the where the biggest investments are i just i was realizing looking forward that i've got the united kingdom other under uzbekistan i'm not quite sure why that fits there but i had cis in europe and there was almost nothing in europe until the recent investment um what's interesting about this as i say i've been building up this slide for about eight years and i used to have percentages at the top um to indicate rough percentage of the distribution of investment and until four years ago americas was five percent yeah of total overseas investment now i've got it as as number one this is where the dollars are today are in the americas from chinese national oil companies and i'm going to end or near end this by saying well why is this happening why are these companies going out all over the world throwing these billions around and i identify sort of four sets of players each with different sets of objectives the chinese government the chinese national oil companies the host governments wherever they are and the host national oil companies the key i think is is if we start with the national oil companies it's very simple until at least the shale gas revolution might start the amount of oil and gas to be found in china remaining was very small so if you're a big oil company you have to get out there was no future in china so the national oil companies ambitions are very clear get out build new business get new reserves new production new profits yeah otherwise they're going to disappear um and and so you basically business are also avoiding tight governance and price controls yeah you're sitting on the other side of the world governance may be a little looser certainly what country you're in but certainly you're away from government price controls you can send sell stuff directly into the market and i think what is interesting and is particularly in the case of the north americas and south america is technology and skills this isn't just catch up it's now they're buying into the unconventional gas the deep water offshore brazil uh the unconventional oil they are going to be at the frontiers of oil and gas that they are then going to be able to take back to china to exploit their shale gas for the government it was a mix there was this belief several years ago that still lingers on that if we have a chinese company overseas that has an oil field this somehow enhances our security of oil and gas supply it doesn't you know oilfield in sudana and angola if the melaka strakes are closed or there's a war in the south china sea does nothing for you but they still believe it more important is industrial policy they chose a few sectors and say we want these companies to be major international players and that makes a lot of sense social policy employment as i see cnpc still has one and a half million people financial policy it brings in foreign exchange the oil companies are the biggest taxpayers in in the chinese economy and it's an arm of foreign policy it allows you to go into areas that you wouldn't otherwise do and i think the fact that china has three major projects in iraq is not just due to national oil company ambitions and i'm sure it's due to china wanting to place itself in the middle east host governments have a range of objectives i'm not going to go through them all here but different ones will have different objectives we need the money we need the skills we want to annoy the americans think venezuela where a pariah state no one else is going to come think iran or sudan so there's a range of host government policies that says we want the chinese and again the host national oil company may also have you know we don't have any money we want to work with somebody who's got money and skills and access to opportunities in china we've got saudi aramco and we've got the kuwaitis now building refineries in china to sell their oil into china and i think the interesting is for how long will these objectives converge in different countries and we're already seeing chinese oil companies starting to have problems in different countries around the world not least nigeria so a series of questions you know what does all this mean for global oil and gas supply the chinese are locking up all the oil and gas well no they're not they're producing stuff selling it on the market or even if they send it home if they are investing that's good there's more oil and gas unless you're green then this year that's bad but if you're looking at look at your oil and gas markets it's good they're producing stuff they have lots of money they're throwing it into new production what does it mean for the large international oil companies well bp and shell there's suddenly finding they're going to bed with new players uh if you go to iraq or angola then bp and shell and and uh total are partnering with the major chinese oil companies i think some of the smaller international oil companies or medium-sized ones and some of the nocs from other oil importing countries india japan melasia and korea they are finding it's very tough competing against the chinese they just don't have the in the bottomless pit of money uh that comes from the chinese state banks the nocs from oil exporting countries are often very happy to work with chinese as i say for their skills technology for their money and for the opportunity to to integrate into the chinese market what does it mean for regional security in the gulf and southeast asia it means that china's interest in this regions is just getting bigger and bigger so you want to talk about southeast asia you want to talk about the middle east you cannot leave the chinese out of these conversations relations with states in africa former soviet union latin america i mean diplomacy resource investment other economic activities basically mean that wherever you go in the world china is there and the oil industry and the minerals industry and other resources are probably there in a big way so that's the end of that story i'm happy to take questions on that or on the unspoken story of china and climate change and internal energy governments thank you very much