Name: Hu Jian, President, Xi'an University of Finance and Economics and China (Xi'an) Silk Road Academy

Title: Present and Future of Energy Cooperation Between China and Central Asian Countries

Abstract:

Oil and natural gas reserves in Central Asia account for 9.4 percent of the world total, a global third place after the Middle East and Russia. China’s energy cooperation with the region, which started with the purchase of the Kazakh Aktobe field, is now in its second decade. As at the end of the 12th Five-Year Plan period Central Asian countries supplied 4 percent of China’s total annual oil imports and 48 percent of its natural gas imports, so effectively diversifying the structure of China’s fuel imports.

Since 2005, China has accelerated its efforts to procure “equity oil” by participating in exploration and production in Central Asian countries, pouring investment into the upper (exploitation) and middle (pipeline and transport) reaches of the oil industry there. By 2014 China’s accumulative investment, through shareholding, in Kazakhstan’s oil and gas exploration sector exceeded $10 billion, accounting for 17 percent of foreign direct investment in the region. Today, more than 15 million tons of oil flows through the China-Kazakhstan pipeline every year, and over 30 billion cubic meters of natural gas is transferred annually through the China-Central Asia gas pipeline.

1. Basic Judgement

Past experience of regional economic integration charts the course of commodity trade cooperation from cooperation in primary industry, cooperation across the entire industrial chain, to regional economic cooperation. We can therefore conclude that the energy cooperation between China and Central Asian countries is now at the point of industrial upgrading.

2. Basic Ideas

China’s energy cooperation with Central Asian countries over the next 10 years is expected to move from primary industry to the whole industrial chain, adding impetus to the development of related industries and infrastructure construction in relevant regions.

3. Basic Assumptions

What’s more, based on the success of the energy cooperation, China and Central Asian countries will expand their partnership to include such fields as chemicals, manufacturing, producer services, finance, and education, thus establishing a multidisciplinary, comprehensive, high-level regional cooperative system. To be specific, it is expected that China and Central Asia will foster a system of energy economic cooperation in five to ten years and one of the across-the-board economic cooperation after five years, further promoting interconnectivity of the comprehensive partnership.

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