Security and Profit in China's Energy Policy

Security and Profit in China's Energy Policy: Hedging Against Risk

ØYSTEIN TUNSJØ
Copyright Date: 2013
Pages: 336
https://www.jstor.org/stable/10.7312/tuns16508
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  • Book Info
    Security and Profit in China's Energy Policy
    Book Description:

    China has developed sophisticated hedging strategies for managing the international petroleum market, maintaining a favorable energy mix, pursuing overseas equity oil production, building a state-owned tanker fleet and strategic petroleum reserve, establishing cross-border pipelines, and diversifying its energy resources and routes. Though it cannot be "secured," China's energy security can be "insured" by marrying government concern with commercial initiatives. This book identifies the interrelationship between security and profit that better describes China's energy-security policy.

    eISBN: 978-0-231-53543-4
    Subjects: Political Science, History, Business, Technology

Table of Contents

  1. Front Matter
    (pp. i-vi)
  2. Table of Contents
    (pp. vii-viii)
  3. LIST OF MAPS
    (pp. ix-x)
  4. ACKNOWLEDGMENTS
    (pp. xi-xii)
  5. List of Abbreviations
    (pp. xiii-xvi)
  6. GLOSSARY
    (pp. xvii-xx)
  7. 1 INTRODUCTION
    (pp. 1-18)

    China’s rise as a global power is likely to be one of the most significant developments in international affairs in the twenty-first century. One dimension of China’s growing influence is its rapid emergence as a major force in world energy markets, and energy security is undoubtedly influencing China’s diplomatic and strategic calculations. This book examines how China is adapting to its increasing reliance on imported crude oil and petroleum products and discusses the strategies that China has developed to strengthen its energy security by reducing its exposure to potential supply disruptions and sudden price rises.

    The book focuses on oil...

  8. 2 CHINA’S ENERGY SECURITY: A New Framework for Analysis
    (pp. 19-36)

    This book offers a new theoretical framework based on the concept of hedging to analyze China’s energy security policy. This chapter seeks to flesh out the core features of that hedging framework. After briefly reviewing traditional market and strategic approaches to energy security, the main section of the chapter shows how a hedging framework can enhance our understanding and provide a better explanation of China’s energy security policy. Thereafter, hedging is linked to the broader theory of risk management.

    Strategic considerations and the importance of market mechanisms have traditionally been the main focus when devising an energy security policy. According...

  9. 3 CHINA’S DOMESTIC ENERGY SECTOR
    (pp. 37-74)

    Oil is the only energy source China imports in substantial quantities. For this reason, this book focuses on oil; it remains the fuel that China is most concerned about “securing.” The analysis generally examines China’s measures directed at securing or, more precisely, insuring an adequate and affordable supply of oil. I differentiate between the external and domestic aspects of China’s energy security policy and emphasize how China has developed global, maritime, and continental hedging strategies to manage both supply disruptions and high oil prices.

    The domestic energy sector remains a crucial element in China’s energy security policy. Energy, of course,...

  10. 4 THE GLOBAL SEARCH FOR PETROLEUM
    (pp. 75-109)

    Today we are deluged with stories about China’s energy security interests and the emergence of China’s national oil companies (NOCs) as a major force in the world energy markets. This chapter focuses on the global search for petroleum—and profit—by Chinese NOCs. It explores how Chinese NOCs have gained access to the world energy market along with how China has diversified its sources of petroleum imports and has acquired overseas assets and production rights (equity oil) that provide a hedge against potential supply disruptions.

    Overseas equity production can partly be a hedge against the possibility that a war, conflict,...

  11. 5 SAFEGUARDING CHINA’S SEABORNE PETROLEUM SUPPLIES
    (pp. 110-149)

    China does not have a navy capable of protecting China’s sea lines of communications (SLOCs), and it will not develop such sea power capabilities any time soon. At the same time, any blockade of China’s vital SLOCs would likely lead to war. In a wartime situation, everything becomes a security issue, and under such conditions China would likely manage disruptions to its oil supply by relying on its domestic oil and energy production and by curtailing oil consumption that is not strategically important. Hence, the primary reason why China is hedging against oil disruptions through the buildup of a state-owned...

  12. 6 CHINA’S CONTINENTAL PETROLEUM STRATEGY
    (pp. 150-196)

    A Chinese Continental petroleum strategy based on pipeline supplies, upstream assets, and loan-for-energy deals is presently taking shape. The development of cross-border pipelines has not been a cost-effective and profit-maximizing strategy but instead an insurance strategy that seeks to hedge against a potential disruption in China’s seaborne petroleum supplies. In the West, the Kazakhstan-China crude pipeline is already operational, and the Central Asian–China gas pipeline runs south of the oil pipeline, pumping gas into China’s East-West domestic gas pipeline. China’s national oil companies (NOCs) also have large equity investments upstream in Kazakhstan. An oil pipeline has been built from...

  13. 7 GLOBAL, MARITIME, AND CONTINENTAL IMPLICATIONS
    (pp. 197-221)

    This chapter is divided into three sections that analyze the global, maritime, and continental implications of China’s energy security policy. Based on the findings of the previous chapters, we seek to examine some of the consequences of the strategies and policies that China has developed to hedge against oil dependency and to present the broader implications of these findings.

    Three global implications will be emphasized: first, the more influential role of China’s national oil companies (NOCs) in the international petroleum market; second, China’s growing cooperation with international energy institutions and organizations; and third, the effects of China’s expanding global oil...

  14. 8 CONCLUSION
    (pp. 222-234)

    China’s energy security policy is characterized by the interaction of security/strategic and profit/market elements. Currently, there is a void in the literature regarding how strategic and market approaches can be combined theoretically with respect to China’s energy security policy. This book establishes a new theoretical framework based on the concept of hedging, linking market and strategic elements, or what has been referred to as the interrelationship between profit and security, in order to analyze China’s energy security policy. It has revealed how and why market and strategic factors are linked in a number of hedging strategies that the Chinese government...

  15. NOTES
    (pp. 235-288)
  16. BIBLIOGRAPHY
    (pp. 289-304)
  17. INDEX
    (pp. 305-316)