Report Says Beijing’s Expanding Energy Exploration Threatens South China Sea Neighbors

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China produces more solar energy panels than any other country and is moving to dominate the world’s electric vehicle (EV) battery market, but the Asian giant is also embarked on an intrusive expansion of oil and gas exploration and production, according to a new report from the Institute for Energy Research (IER).

“China’s strategic emphasis on low-carbon energy has captured the attention of U.S. analysts, prompting some to call for a commensurate focus on the space stateside,” according to the report that was released Tuesday.

“Though China indeed has invested heavily in what the International Energy Agency (IEA) calls energy transition minerals (ETMs), produces more solar panels than any other country, and is quickly scaling its battery production, China’s energy appetite is decidedly omnivorous,”the report said.

“While it has ramped up on ETMs, solar panels, and batteries, China has never wavered from its quest to secure the fossil resources that constitute the overwhelming majority of its total energy mix. China’s soaring oil and natural gas demand has catalyzed a policy of increased resource production,” the report continued.

As a result of its increased energy production, China “now routinely encroaches upon the waters of other South China Sea littoral states, such as Vietnam, the Philippines, and Malaysia. Despite international rulings against its behavior in the region, China’s expansionary pursuits have only intensified in recent years, jeopardizing the shared global interest of a free and open Indo-Pacific.”

The IER report was researched and written by Jordan McGillis, who is Deputy Director of Policy for the Washington, D.C.-based non-profit foundation.

China’s energy consumption has doubled in recent years and, while Beijing is often praised in Western media outlets for its efforts in the renewable energy sector, the reality is Beijing has a voracious appetite for fossil fuels, including oil, natural gas and coal, according to McGillis.

“Today, China consumes 50 percent more crude oil than it did just 10 years ago. According to the U.S. Energy Information Administration (EIA), China’s oil consumption growth accounted for two-thirds of new global oil consumption in 2019,” McGillis reports.

The demand is so great in China that even with the slowing world economy occasioned by COVID-19, Beijing burned more crude oil in 2020, about five billion barrels of oil, the most ever in one year.

Combined with soaring demand for natural gas, China’s fossil fuel consumption dwarfs its renewables use.

“China’s use of natural gas has accelerated even faster than its use of oil, multiplying tenfold since 2001. While oil’s growth in China has tracked with the country’s overall energy usage uptick, remaining at around 20 percent of the total energy supply for past 20 years, natural gas has ascended in the same time period from 2 percent of China’s total energy to 8 percent,” according to McGillis.

“For comparison, in 2018, the last complete year in IEA’s data browser, wind and solar combined to provide less than 3 percent of China’s energy,” he said. As a result, China is now the world’s largest importer of crude oil, providing three-fourths of the country’s annual use.

The South China Sea is a fertile area for oil and gas exploration and China’s expansion of its efforts in the region are a key part of Chinese leader Xi Jinping’s overall political program.

McGillis quotes Erica Downs, senior research scholar at Columbia University’s Center on Global Energy Policy, on Xi’s push:

“Xi instructed China’s [national oil companies] to ramp up domestic exploration and production of oil and natural gas to enhance national energy security in July 2018. Xi’s directive is consistent with his championing of self-reliance in response to the US-China trade war.

“The trigger for Xi’s embrace of self-reliance was the U.S. Department of Commerce’s imposition in April 2018 of an export ban to China’s telecommunications equipment manufacturer ZTE that threatened the Chinese national champion’s survival. Although the Department of Commerce lifted the ban in July 2018, the incident underscored for Beijing the risks of relying on imports, especially from the United States, for critical inputs into the Chinese economy.”

Thousands of new oil and gas wells have been drilled in response to Xi’s directive, McGillis notes, including hundreds in “the contested offshore areas of the South China Sea” that are also a naval and commercial shipping flashpoint between China and the United States.

The South China Sea region is estimated by the EIA to contain at least 10 billion barrels of recoverable oil and 200 trillion cubic feet of natural gas, but McGillis claims China’s estimates put those totals “an order of magnitude higher.”

Relying on its “Nine-Dash” claim to sovereignty over the bulk of the South China Sea, Beijing routinely violates the Exclusive Economic Zones recognized by international authorities of Vietnam, the Philippines, Malaysia, and Indonesia.

“Each of the aforementioned countries regularly finds its fishing and energy industries under harassment from Chinese entities, both formal and informal, while also finding Chinese entities pursuing fishing and energy activities of their own” at the furthest reaches of the line, McGillis writes.