China May Need $75 Billion a Year to Boost Oil, Power Output
Oct. 1 (Bloomberg) -- China may need $75 billion in investments annually over the next two decades to boost output of crude oil, natural gas, coal and build power plants, according to estimates by Deloitte Touche Tohmatsu.
Half the amount is needed for the construction of power plants and transmission lines, said Manoj Singh, Hong Kong-based chief executive for Asia Pacific at Deloitte Touche Tohmatsu, the world's second-biggest accounting firm.
``We need all forms and all sources of energy in China to meet its needs,'' Singh said in an interview in Beijing. ``The government is going to fund a significant part of the projects, with maybe some private-public partnerships.''
Demand for electricity and fuels in China, the world's seventh-largest economy, rose as carmakers, shipbuilders and manufacturers boost production. The Manila-based Asian Development Bank last month lifted its forecast for China's economic growth this year to 8.8 percent from 8.3 percent.
China needs funds to increase domestic oil and gas reserves and build storage terminals and fuel pipelines, Singh said. China's government will initially be the biggest investor in energy, using money raised from bonds, commercial loans and project financing. Private investors will only pump money into the projects after they are assured of returns, he said.
Power producers are accelerating construction of generation plants in the next six years, adding enough capacity each year to power Sweden. China suffered power shortages this year as the economy expanded 9.7 percent and electricity demand shot up 16 percent.
Shanghai
The government in Shanghai, China's biggest commercial city, plans to spend at least 5 billion yuan ($604 million) a year until 2010 to build power transmission lines and transformers.
``In China, energy demand is rising very fast and its energy demand would need a lot of infrastructural support,'' Chen Jiulin, managing director and chief executive of China Aviation Oil (Singapore) Corp. said in Beijing. ``The current infrastructure is just not enough to meet demand.''
China may award an $8 billion order for four nuclear reactors to an overseas supplier such as Areva SA, Westinghouse Electric Co. or Siemens AG as part of the world's biggest nuclear power construction program, Yu Jianfeng, a director at China National Nuclear Corp., which operates the nation's reactors, said last month at the World Energy Congress in Sydney.
A single foreign bidder may be chosen to build the four reactors, with work starting by 2007, Yu said. China Nuclear and affiliate Guangdong Nuclear Power Co. plan to build a further four reactors to supplement the 11 already operating or under construction in China, he said.
Find More
China's oil companies are stepping up efforts to find oil and gas after crude oil prices rose, and boosted costs for China, the world's second-largest energy user, lagging only the U.S.
``I don't think they've been as aggressive as they are now,'' said Bruce Schulberg, a lawyer, who advises companies on investment in China's energy sector at Jones Day in Beijing.
Crude oil futures in New York have risen 68 percent in the past year. China's oil demand may grow by 510,000 barrels a day next year, accounting for 28 percent of the world's growth of 1.82 million barrels a day, the International Energy Agency said in July.
China's three largest oil companies -- PetroChina Co., China Petroleum & Chemical Corp. and CNOOC Ltd. -- are boosting spending by at least 9 percent this year on oil and natural gas exploration and production.
Costs
Rising oil prices, which boosted earnings of the companies in the past year, also raised the costs for the companies as they step up efforts to find more oil.
``China started to seriously analyze international oil-price trends two years ago as our demand for oil increases,'' Zhang Guobao, Vice Chairman of China's National Development and Reform Commission, the nation's top economic planning ministry, said in Beijing. ``China's government will push for the construction of more oil and gas infrastructure.''
China in the next 20 years will complete construction of an additional 100,000 kilometers of main oil, oil products and gas pipelines, Zhang said at the China International Petroleum and Petrochemical Industry Summit last month.
To contact the reporter on this story:
Wing-Gar Cheng in Beijing at wgcheng@bloomberg.net.
To contact the editor responsible for this story:
Reinie Booysen at rbooysen@bloomberg.net.
Last Updated: September 30, 2004 20:24 EDT
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