China may be addicted more to coal than oil

There’s one surprise entrant in the group of oil companies announcing plans this year for how they’ll reduce emissions: PetroChina Co.
China’s oil companies, unlike their peers in the US and particularly Europe, don’t traditionally treat climate targets as a major issue. Beijing, after all, isn’t even promising to hit its emissions peak until 2030.
The large fund managers that have been pressuring Western
oil companies to improve their
carbon commitments don’t
make much difference, either. PetroChina’s chairman, Dai Houliang, is a Communist bureaucrat whose more significant job is party secretary of state-owned parent China National Petroleum Corp.
His main role at PetroChina is to make sure it plays its part in guaranteeing energy security, one of
Beijing’s most critical issues. As shareholders will no doubt be bitterly aware, their interests are neither here nor there:
So PetroChina’s announcement in its half-year results that it would seek a “near-zero” target for emissions by 2050 is unexpected. With China preparing its 14th five-year plan — probably the most crucial document in determining whether the planet can avoid devastating climate change — that might be taken as a sign that the winds of change are blowing through Beijing.
It’s probably best not to get too excited, though. In most countries, the chief objective is to minimise reliance on the worst-polluting of fossil fuels: coal.
In China, however, bureaucrats are more preoccupied with self-sufficiency, so limiting oil imports is a bigger concern. In that sense, PetroChina’s announcement may just be further confirmation that it’s national security considerations, rather than climate, that’s driving energy policy in Zhongnanhai.
Have a look at what’s happening to PetroChina’s core business and it’s obvious why the company may have other reasons for pivoting to renewables. Oil output from its domestic wells has been more or less flat for four years, despite strong demand growth. While gas production has increased in line with government policy, the cost has been enormous, as we’ve written: Three-year average all-in finding and development costs for its petroleum wells are running at $21.74 a barrel, well above most Western oil majors.
PetroChina isn’t alone in this. Getting more hydrocarbons out of China’s unpromising soil has been getting harder for some time. Despite domestic demand increasing by about a third between 2015 and 2019, production from local wells fell 11%. As a result, the country went from importing 31% of its crude in 2002 to 72% last year, at a cost of some $220 billion.

—Bloomberg