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Interview

with Hu Weiping, Deputy Director General, National Energy Administration (NEA) of China

21.03.2012 / Energyboardroom

To set up a specialized Energy Ministry, China established the National Energy Administration and the National Energy Commission. How do these bodies work in tandem with the National Development & Reform Commission (NDRC) in formulating China’s energy policies and regulating the energy sector?

In August 2008, according to the pronouncement Regulations on the Management of National Agencies from the State Council, the National Energy Administration was founded at a Deputy Ministry level, under the management of the NDRC.

The NEA was founded on the basis of the former NDRC Energy Bureau, where I used to work. With our entire staff transferred from that bureau, the newly founded NEA upgraded and expanded upon its former duties.

The former and current administrators of the NEA, Mr. Zhang Guobao and Mr. Liu Tienan, are also vice chairmen of the NDRC. The office of the NEA is located within the NDRC complex.

In January 2010, to strengthen strategic planning and the overall coordination of the energy sector, the State Council decided to found the National Energy Commission (NEC). Prime Minister Wen Jiaobao is the director of the NEC.

The NEC is responsible for formulating national energy development strategies, studying key issues related to energy security and energy development, and providing overall coordination for major events in domestic energy advancement and international energy cooperation.The NEC is a high-level coordination organization. The posts of the NEC General Office director and vice director are respectively held by the chairman of the NDRC and the administrator of the NEA. The General Office’s daily work is undertaken by NEA.

There is a growing concern, as China continues to expand, that it will not have enough energy to fuel its growth. What steps are the authorities taking, by implementing strategies like the 12th 5-Year Plan, to increase supply while efficiently managing market demand?

To solve the problem of increased energy consumption, we need to ensure supply while controlling demand as much as we reasonably can.

In order to ensure the supply of oil & gas, firstly we need to keep domestic oil production stable. Second, we need to enhance natural gas exploration and increase its production. Third, we plan to conduct exploration experiments in unconventional gas (such as shale and coal bed methane), attempt to make a breakthrough and to achieve commercial exploration. Last but not least, we would like to further international collaboration and continue to import oil & gas resources.

In order to control the demand for oil & gas, on the one hand, we need to adjust the structure of our economy and change the pattern of economic growth; on the other hand, we need to utilize alternative energies in communications and transportation—for example, we must encourage the development of electric vehicles and electric drive rails in order to decrease the amount of oil used in transportation.

In a recent address to the National People’s Congress, prime minister Wen Jiaobao gave an overview of current government initiatives. The expected GDP growth rate for 2012 is set at 7.5%, which demonstrates our resolution to slow down our growth and adjust our structure.

During the 12th 5-Year Plan period, we believe that we can ensure the stability of our oil supply. Furthermore, at the time we drafted the details of the Plan, we carefully studied the issue of balancing supply and demand.

What have been the benefits of China’s “Reform & Opening Up” policy on the oil & gas sector thus far, and what should be the role of foreign cooperation in this industry today, in helping China to implement new technologies and international approaches?

During the last 34 years of Reform & Opening Up, the Chinese economy has developed at a very rapid clip—a great variety of sectors in our society have significantly evolved. The Reform & Opening Up policy brings opportunities for the Chinese oil & gas industry to learn from advanced international companies. Through learning, our industry has improved in terms of technology, finance, management, and ideas.

In 1982, CNOOC was founded. In the same year, it started to invite international bidding and tendering. From then on, CNOOC has been learning technologies and management techniques through cooperation with foreign companies.

In 1988, China dissolved the Ministry of Petroleum Industry and founded CNPC. From that point on, government and business have been separated in the petroleum industry.

In October of 2000, Sinopec went public in Hong Kong, New York, and London. Going public not only brought capital for Sinopec, but also helped it to improve its company structure and management practices. Presently, the three main national oil companies have all gone public internationally.The above three major events were precipitated under the auspices of Reform & Opening Up. I should say that without the policy, there would be no development of within the Chinese oil & gas industry.

Today, China’s oil industry is quite mature and our technologies are competitive. Based on our national companies’ capabilities and strength, we can conduct exploration in most of the oil & gas fields in China. However, I think there are three main points that we should continue to learn from foreign entities.

The first point is to learn the technology of shale gas exploration. The US has garnered great success in the shale gas field, and China has abundant quantities of this resource. We hope that by importing advanced foreign technologies, we can accomplish the commercial exploration of shale gas.

The second point is to learn to economically exploit difficult-to-produce reserves. Today, when exploiting certain reservoirs, such as low-permeability oil fields and high-sour-gas fields, we cannot achieve much profit by utilizing current domestic technologies. We need to learn from other countries through international cooperation.

The third point is to learn deepwater oil and gas exploration and development technology. The exploration of deepwater oil is highly risky, and requires big investment and a high level of technology. In this aspect, we have much to learn from western countries.

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