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Guest Post: China Is Winning the Energy Race
Submitted by Marin Katusa of Casey's Energy Opportunities
China Is Winning the Energy Race
Stop the presses. The United States is no longer the world’s biggest consumer of energy.
After topping the energy consumption charts for more than a century,
the U.S. has been left behind as China leapfrogged past. According to
the International Energy Association’s (IEA) latest report, China
burned its way through 2,252 million tonnes of oil equivalent last year
– about 4% more than the U.S.
(The oil-equivalent measure is a bundle of all forms of energy
consumed, including crude, coal, nuclear, natural gas, and renewable
resources.)
That’s an astonishing turnaround, according to IEA chief economist
Fatih Birol, who noted that as recently as 2000, the U.S. consumed
twice as much energy as China.
Energy Consumption Trends of China and the United States 1965 – 2009
Source: BP Statistical Review of World Energy, 2010
It’s no longer 1973, when President Nixon could declare that our
status as top energy consumer was “good. That means we are the richest,
strongest people in the world.” Today, bragging about winning the
energy-eating competition doesn’t gain you any brownie points. Which is
probably why Chinese authorities were quick to reject the IEA data as
“unreliable,” choosing instead to focus on their intention to sink about
5 trillion RMB (about US$750 billion) into renewable energy projects.
Despite the denials, a new age in the history of energy has begun, and
the implications are enormous. China may not want to accept the honors,
but the reality is that it’s now the most important player on energy’s
demand side.
According to the IEA report, China will be investing more than $4
trillion over the next 20 years to ensure there are no power or fuel
shortages, and that there is enough energy to keep feeding its economy.
Thus the ever-increasing number of ships steaming out from Canadian
and Australian ports: all are bound for Beijing, all loaded with
precious energy supplies.
Whether it’s coal, gas, uranium, or oil, China’s import numbers are only heading one way – up. Here’s a brief overview.
Coal:
The wealth of Western nations was built on the back of coal, and China plans to be no different.
King Coal, cheap and plentiful in China, accounts for 70% of all energy
consumed. Most of that goes to meet the burgeoning demand for power,
and with US$30 billion just invested into improving the national
electrical grid, we’re not going to see coal taking a backseat anytime
soon.
China also needs metallurgical (coking) coal for producing steel – the
backbone of an economy. As the construction boom continues,
corporations will be crying out for it. But with no higher-grade
reserves of its own, China is buying up whatever is in the market,
sending coal prices skywards.
Oil:
Beijing continues its relentless courting of oil-rich countries across
the globe. Its national oil companies (NOCs) offer debt forgiveness,
development packages, infrastructure improvements, and, yes, bribes, in
exchange for secure oil contracts, especially in Africa. The net
overseas production from the three Chinese NOCs for 2010 will be a
record-breaking 1 million barrels a day... that’s enough to fuel all of
Australia!
Not content with just acquiring oil assets outright, Chinese NOCs are
also tying up partnerships with other oil companies. In fact, the three
Chinese NOCs accounted for nearly 20% of all global deal values in the
first quarter of 2010.
Nor has China ignored North America. It’s heavily invested in the oil
sands of northern Canada. This huge reserve is likely to become the
most important source of U.S. oil, and China is making sure its finger
is very firmly in the pie.
The U.S. still remains the number one consumer of crude. But over the
past three years, China has accounted for at least a third of world
demand growth in crude. And with a projected 45% increase in demand in
the next five years, Chinese NOCs won’t be hitting the brakes anytime
soon.
Gas:
China is throwing itself onto the clean and green bandwagon as well.
And the cleaner-burning alternative to oil is its cousin, liquefied
natural gas (LNG).
Expectations are for a hike of almost 50% in Chinese demand for LNG by
2020. This year alone, China is expected to boost its LNG imports by
about 65%, from 5.5 million tonnes in 2009.
No surprise that China is wedging its foot very firmly into the vast
gas reserves of Kazakhstan, Uzbekistan, and Tajikistan. A
1,100-mile-long pipeline has just been completed to link Chinese
factories and power plants to Central Asia.
Unconventional gas deposits – like shale gas – will also have a role to
play. The country’s shale gas reserves are estimated to be about 26
trillion cubic meters.
As China wakes up to the potential of this energy source, it’s also
waking up to the fact that the technology to unlock it is in North
America. So planes full of well-heeled Chinese investors are heading on
over to woo North American producers.
If you’re a small-capitalization firm, with the potential to lower
costs and risks, improve project returns and tap opportunities that are
otherwise beyond reach, you’re in demand.
Uranium:
Nuclear power is coming to China in a big way. The country is set to
purchase up to 5,000 metric tonnes of uranium this year – more than
twice what it needs.
But consider that by the year 2020, China will have at least 60 nuclear
reactors up and humming across the country, throwing off 85 gigawatts
of output and demanding 20,000 tonnes of fuel per year. That’s nearly
40% of the 50,572 tonnes mined globally in 2009.
Now the hoarding makes more sense.
The result: After a three-year lull, uranium prices are spiking up.
Analysts at RBC Capital Markets have predicted a 32% spike in prices
for next year – for a uranium company, this is Christmas come early.
And while the bull market of 2006 saw at least 27 new uranium mines
opening up across the world, it’s not going to be enough. Yellowcake is
back, and it’ll be glowing red this time around.
China might not wish to be called the world’s biggest energy consumer,
but it’s a fact, and its edge will continue to grow. The process of
explosive economic development is like feeding teenagers – they’re
never full. And while China continues on this tear to eat up the
world’s coal, oil, uranium, and gas, there are some great opportunities
unfolding.
Which producers are favorites to supply China?
Which companies are most attractive to Chinese investors, and to the NOCs?
When will uranium prices jump by 200% again?
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China is building MANY smaller nuclear power stations, as they are preparing for even more consumption yet want to avoid the oil/coal situation.
Already covered by ZH, but getting more press:
China poised to set gold market alighthttp://www.financialpost.com/China+poised+gold+market+alight/3362739/sto...
They just did a MOU with Paladin. Its not just China either -
Can't wait to hear Chinese consumers called.. Pigs..... for consuming the world.
Seriously, leave us the hell alone already and go bust their balls about fluorescent light bulbs and windmills.
Yawn. That's so last year.
who are the players in uranium? is there an ETF established yet?
Cameco, Areva
Uranium Participation Corporation [TSX:U]
Authoured and co-authoured two papers for the IAEA a few years back on uranium supply and demand......
http://www-pub.iaea.org/MTCD/publications/PDF/P1288_web.pdf
Spent 15 years in the business. There's a general lack of quality companies to invest in. Paladin is not bad but need to show some free cashflow sooner rather than later. Extract Resources is sitting on a big orebody they'll likely sell to the highest bidder but this looks built into the price.
Plenty of promoters in the business looking to mine the markets, not uranium.
Any thoughts on UEX.TO? Both Cameco and Ariva own part of it and, among other things, it apparently has the largest undeveloped deposit in the Athabasca area.
UEX's properites I doubt stand much chance of being mined. Cameco knew this when they spun them out. I was the mine manager up the road a ways at Rabbit Lake for awhile so have a good sense of what can and cannot be mined in that area so I would not recommend UEX. Denison is onto some interesting hits north of Key Lake so they will likely be promoting this over the next little while. But I haven't seen anything mineable yet and it is almost impossible to license a new uranium mine in Canada these days. Areva is cash strapped these days so are not pushing Shea Creek project hard as the operator. A price rise in uranium will lift all boats however. Because the Kazakhs are still ramping up production at numerous mines any increased demand from China will likely be filled from here. So I don't think there will be much fireworks for awhile. But I'll keep my ear to the ground waiting for demand to catch supply again. Cameco is OK but their capital commitments over the next few years will chew up most cash and cashflow so its not really the growth story they are attempting to promote. Cigar Lake has some big challenges ahead. I could go on writing for days but the players haven't appreciated me airing their dirty laundry in the past nor likely going forward.
Thanks very much for that in-the-know insight!
I'm just starting to get into uranium for the long run, did get some Paladin for starters, and I'm looking for other ideas, and see that the jrs have a lot more bang for the buck.
I just read about UEX's latest drilling results, that Cameco just bought more shares, looked at their long term chart, and they sure looked cheap now... but your comments on what is feasible to mine adds a whole new dimension.
Is Dennison worth a shot?
Investing in Denison would be a timing issue. For the Wheeler River project....
"An NI 43-101 compliant resource report is currently in preparation and scheduled to be completed in the fourth quarter of 2010." I'm led to believe this report will suprize to the upside. Otherwise tha assets of Denison are rather uninspiring. So there is likely a short term trade here if you can time it right.
But you can't look at this one from traditional valuation perspectives, P/E etc. since the revenues are too erratic.
Thanks again for that insight!
I was looking into them last night and they seem to have hit some rich ore in their latest drilling at Wheeler River, so I guess that should help. That seems to be their best hope for bigger things.
Although any short term pops would be great I'm looking at this as a long run play given the future supply-demand scenario, particularly since so much uranium seems to be in countries that might get wierd.
Of course, plenty of other things could get very wierd in the meantime, and it will probably be quite the roller coaster on the way there.
nlr is the only etf that comes to mind, but i'm pretty sure there are others.
cameco is a major processor, areva and shaw build plants, urre is a smaller processor.
there are plenty of canadian junior explorers... also good usd hedges as they're listed on canadian exchanges... asx.v, byu.v, dit.v, jnn.v, mga.to, pnp.to, puc.v, tue.v, tvc.v, uec, uex.to, urc.v and vae.v to name a few.
UEC, URRE
don't touch them until they are back to penny stocks again
Oh thank God! Now I can try to seek the eco freaks on China. "Well you know China is the worlds biggest user of energy and polluter. Shouldn't we stop them first" Maybe it's not fair but I'll use any trick in the book to distract them from trying to make me live in a mud hut.
+1000
I wholeheartedly support all eco-warriors to go over to China and push their climate agenda.
ever live in a mud hut? i have. could be worse.
And your welcome to it. I personally like having electricity and running water. If a person wants to live that way, fine. But I don't want to be forced to live that way.
Deleted double post
It was only a matter of time.. How are car sales doing? they still keeping cars in garages or is the Chinese government pushing out bullshit GDP numbers again.
A lot of that Chinese energy is actually our energy that we've outsourced... to produce the goods that we consume. So, I guess it really depends on how you want to dice the apple.
Like building all those solar panels. :)
Honestly though, I wonder if taken as a whole (extracting the raw materials, manufacturing, shipping etc.) if we actually produce a net gain in energy with solar panels? What is the time frame? Does the panel last that long?
Hey ragnarok(did you get that name from FFXIII?), solar has an energy return on energy investment of between 5:1 to around 20:1 dependent on local conditions. But these ratios are heavily subsidized by fossil fuels so at this point we really don't have enough data on whether solar would be viable without fossil fuel subsidies. We need more data and large studies to show whether solar energy is self sustainable from extraction, production, distribution and maintenance.
No I didn't get the name form FFXIII, I wanted some Norris mythological name and somebody else already had Loki. Plus the Viking version of armageddon/revelations I thought was fitting.
It depends on the technology used and the area you live in, but it's typically only a couple of years according to most studies. The panels should have a lifetime of at least 25 years, and some manufacturers guarantee the panels will still be capable of producing 80 percent of their peak output at 25 years.
lmao.
Check this lovely graph of the avg. cost per technology, in sunny Portugal, for starters (page 12 - guess which bar). Also this, this, and this. Also, speaking of the Chinese, you might want to read this, first - and, if I remember well, they're also only ~85% recyclable.
edit: the graph refers to "special regime" production; that is, you, me (and Dupree?) selling to the grid, which would be the most accurate, in this case. It shows how much subsidies you'll need to make it viable.
Lights Bitchez!!
I was in Shanghia a couple of years ago.. I've never seen such an infatuation with lights...
It's all those years with Candles..................
This has been going on for years and years. They have a 100 year plan we have no plan. Our country and the way it was built is utterly dependent on king dollar in exchange for oil. We are so spread out with our highways and byways. Well its over. No mass natural gas programs no nothing and we are utterly dependent on it. I thought back in 2004 that Bush was in Iraq for soley taking oil reserves only to find out China has bought them all along with all of Afghanistan's key resources. Our leadership handed out stimulus checks and told the masses to go shopping. China used their king dollars to buy strategic natural resources. China just wants stability first and foremost. Gold is going to at least 12000 and much higher if their is no soverign debt currency split.
That's the biggest pisser for me on Iraq--"no blood for oil!"????
Hell, we spent blood for nothing but goodwill and an embarassingly lame attempt to democratize a bunch of people that want nothing to do with democracy.
Couldn't we have at least loaded up a FEW tankers before we let China buy everything out from under the Iraqis???
Ahem. Haven't you noticed the US has a pattern of "democratizing" the cheap labor pools? It's all about nation building. Securing nations for other nations to build, even building railways "right where al qaeda exists", profits for the int'l development bankers, paid for by the sweat/blood of taxpayers.
Interesting how patriotism is used to coax the masses, what a sick joke I'm stuck in.
I am getting that Otto von Bismark feeling from all this coal stuff
The position of Prussia in Germany will not be determined by its liberalism but by its power ... Prussia must concentrate its strength and hold it for the favourable moment, which has already come and gone several times. Since the treaties of Vienna, our frontiers have been ill-designed for a healthy body politic. Not through speeches and majority decisions will the great questions of the day be decided - that was the great mistake of 1848 and 1849 - but by iron and blood.
Here we go again - it just is a little disappointing that so much energy is still produced by coal and gas - America was on the cusp of huge technological changes in the 60s but the narrow minded monetarists killed big science so therefore we are going back to the 19th century again.
But do we still have to measure each other by how much pig iron we smelt - it is so Maoist man.
They better sink those subsidies into "green" energy! The peak of production is coming. Oil production will peak with in the next couple years, then reliance on dirty energy like coal will pollute the world into hell, if we can afford it. Most likely, the dams that are up and running before we receive negative nine percent growth (GDP) every year will be the only viable energy source. Building new dams will be huge endeavors, same with wind farms considering peak steel, and solar which uses metals and petroleum in its voltaic. NG would have been an option, except we do not have any here in America, the only way to get it here is to liquefy it, and that is a major hazard. Europe is stoked.
NG would have been an option, except we do not have any here in America
No natural gas in America? Shooting the smack directly into your head again?
China has 4 times the population of the US, so in order to get to per capita energy use equivalence, their energy consumption would still have to increase 4-fold.
Still, China is a prime example of what can happen when environmentalists don't run the show (as they do in the US). Massive energy use of whatever/whenever, but also the concommitant pollution. I don't want the pollution of China, but I do think we've swung too far away from energy production in favor of environment.
Cheap and abundant energy is the basis for the US becoming a superpower. As we continually restrict ourselves from using that which is most plentiful in our country (like coal, for example, or nuclear), energy becomes more expensive and our superpower status deflates like a leaky balloon.
You also have to take into consideration production figures AND what they refer to.
just wait till India gets on board....They're China in population but with no natural resources to offer.....Man, Slumdog Millionaire is a depressing movie.
And 65 different religious sects..................
At least their smarter than we are, they buy and hold more Gold per capita than any nation on the planet.( They know real value).
holding extra gold isn't going to solve their water/resource problems
this makes them smarter how? sounds like misallocation to me...
"Expectations are for a hike of almost 50% in Chinese demand for LNG by 2020. This year alone, China is expected to boost its LNG imports by about 65%, from 5.5 million tonnes in 2009."
That doesn't make sense to me. Did you mean to say 50% per year? Then slowing in later years to make up for the fact that its 65% from 2009 to 2010?
Yes! The chinese are winning the energy race... the race to the bottom of the (oil) barrel that is. And the winner gets.... nothing!
I think we need to redefine what "winning" the energy race means. Winning means you're the first one to come up with a workable sustainable energy policy.
http://steadystate.org/discover/envisioning-the-good-life/energy/
The winner gets to keep the drums.
Oh, yes... wind energy - clever (lol).
The important stat is GDP output per equivalent barrel (or ton) of crude consumed.
I'll bet all those Chinese nuclear reactors are built with the same degree of expertise, engineering brilliance, attention to detail, and pride of craftsmanship as the boatloads of goods they send to the US and the rest of the world. If they weren't, I'd probably have to be worried.
They're not totally stupid--i read there's a French firm that's doing it for them.
That China out uses the US in energy proves conclusively that China's GDP is higher than the US. Dollars mean nothing especially if China's currency is not convertible and its value relative to the dollar is being held down.
Second, energy consumption is more closely correlated to industrial production than end user consumption.
So there you have it: Energy consumption is a better measure of economic activity than GDP. China leads the world in GDP measured by energy.
Interesting SP500 chart ...
http://stockmarket618.wordpress.com
This is what happens when every chinaman uses an extra cup of gasoline, coal, rice, just about anything really.
There are certainly a lot of details like that to take into consideration.I read and understand the entire article and I really enjoyed it to be honest.
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