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Embracing the Low Carbon Economy of Sustainable Energy Development

A speech from the "International Petroleum Technology Conference", Doha
Zhou Jiping, Vice President
December 7, 2009

Distinguished Mr. Chairman, Guests, Ladies and Gentlemen:

I would like to extend my gratitude to the organizing committee for inviting me to participate and speak at this Conference.

In today's world, the sustainable development of economy, energy, and the environment has become an important issue of global concern. A consensus has already been established regarding the development of a low carbon economy. The upcoming climate conference in Copenhagen will bring together political leaders from across the world to discuss the different approaches and objectives people must undertake to achieve low carbon development. At this point in time, it is of more practical significance for us to explore how to ensure the sustainable development of society's energy.

Energy utilization has a direct impact on the development of human civilization. Looking back five thousand years, mankind broke away from an ignorant and primitive state towards more a civilized development path, evolved from an agrarian society to an industrial one, and shifted the source of primary energy from firewood into fossil fuels such as coal and oil. The development of heavy industry during the 16th to 18th centuries brought forth the industrial age.

This industrial civilization, which is based on fossil fuels, consumes substantial energy resources while producing abundant materials and benefiting the mankind. However, it also has a negative impact on the natural environment, and this negative impact is intensifying. The balance between energy and the environment is therefore the greatest challenge facing mankind today.

Sustainable development of energy calls for a low carbon approach. Currently, the world is at a critical stage of industrialization in developing countries. During the past two centuries, industrialization, which is based on the intensive use of fossil fuels, modernized a population of 1.2 billion in advanced, developed countries. And with a population of over 3 billion, developing countries will likely follow the tide of industrialization for the next 30 to 40 years.

Along this path, to secure energy supply and mitigate the negative impact on the environment, it is essential to choose low carbon development based on low energy consumption, low pollution, and low emissions. Low carbon development will ultimately transform the development mode of human society from an industrial path to an ecological one.

Low carbon development should not be simply interpreted as the development of low carbon energy; it is rather the sustainable utilization of low carbon energy. It is a trend as well as a prolonged process for energy to evolve from high carbon to low carbon and eventually to zero carbon. During such prolonged transition period, therefore, fossil fuels will continue to ensure the sustainable development of the global economy.

As of today, fossil fuels account for almost 90% of primary resources consumed in the world. With the development of the global economy and intensified industrialization efforts, the demand for fossil fuels remains on a fast track. It is estimated that, by 2030, the global demand for primary energy will rise by 55%, and fossil fuels will account for as high as 82% of the primary energy mix.

During this transition period, to align with low carbon development, our energy industry bears the responsibilities of adjusting the energy mix, quickening natural gas development, and increasing the proportion of clean energy among fossil fuels.

Low carbon development brings important opportunities to the natural gas industry. As the most environment-friendly fossil fuel, natural gas plays a unique role in the transition of the energy mix from high carbon to low carbon and boasts tremendous development potential. Not only can natural gas development increase the proportion of clean energy in fossil fuels, but it can also compensate for disadvantages of renewable energy, for example, the inability of power storage and the unstable supply of wind and solar energy. In this respect, the gas industry will also help accelerate the development of renewable energy.

In the coming 20 years, the demand for natural gas will continue to grow at an average annual rate of 1.8%. Natural gas could overtake oil to become the world’s largest energy source some time in the first half of this century.

Ushering into this new century, the diversification of supply sources of natural gas has emerged as a significant development trend. The global gas industry continues to grow substantially. Conventional gas resources amount to 421 trillion cubic meters despite a rate of proven reserves at merely 20%, while unconventional gas resources amount to 922 trillion cubic meters, more than twice those of conventional gas resources, with a much lower rate of proven reserves.

It is a rather long process to go from the utilization of conventional oil resources to that of unconventional resources. Nevertheless, technology advancement has dramatically shortened the transformation process from utilizing conventional gas resources to unconventional ones. In particular, tight gas, coalbed methane and shale gas have become important supply sources of natural gas.

Technology advancement has supported natural gas development, transforming the global dynamics of gas supply and demand. In recent years, technology advancement has substantially expanded the areas where natural gas resources may be obtained, which turns more unconventional gas resources into major supply sources. This has resulted in regional and temporary oversupply of natural gas.

In the United States, for instance, the production of tight gas, coalbed methane and shale gas accounted for 42% of gas production in 2007, and is estimated to reach 48% in 2010. This is possible due to the commercialization of drilling technologies such as the horizontal well, multi-lateral well, coiled tubing drilling and coalbed drilling, as well as the commercial application of multi-zone fracturing of horizontal wells and micro-seismic fracture imaging technologies.

Because of such fast-growing domestic gas production in the United Sates, the ambitious LNG import plans from the Middle East and Africa have been put on hold; as a result, the dynamics of natural gas supply and demand have changed dramatically.

We must attach great importance to developing technologies and training personnel ahead of time. In the oil & gas industry, it normally takes over ten years to see a breakthrough in a major innovative technology. Therefore, industry-leading research, with great foresight, is vital to sustained natural gas development. Technology advancement requires not only large-scale, intensive investments but also high-caliber R & D personnel.

Currently, the sustainable development of the oil industry is confronted with the challenge of technical workforce replacement. Since the 1980's, during nearly 20 years of low oil prices, the petroleum education system suffered. In addition, such fast-growing sectors as information technology attracted a large number of talented people who were otherwise potential candidates for the energy industry. To a certain degree, all the traditional industries are confronted with a shortage of young talented people whose numbers are insufficient to replace the aging workforce. It may also take over 10 years to improve such an unfavorable situation.

For a responsible company to set a solid foundation for future development it needs to intensify its efforts in tapping the potential of the current workforce and accelerating personnel training. It is no less important than making investments in oil & gas exploration and development.

The win-win cooperation is an important assurance for realizing the value of natural gas. Natural gas business is an integrated industry chain and a closely linked value chain. The exploration, production, transportation, distribution, sale and utilization of natural gas all constitute an industry chain as well as a closely linked value chain. Such industry and value chains closely link producing countries with consuming countries and link market reliability of producing countries with supply security of consuming countries.

Although there is an emerging globalization trend of the natural gas market as LNG development accelerates, gas markets still remain regional at the core. Producing countries and consuming countries share the same wish to form long-term and stable regional cooperation. And relatively stable pricing mechanisms and acceptable price levels are the foundations of mutually beneficial and win-win cooperation in developing the natural gas industry.

Ladies and gentlemen,

As a major country regarding energy production and consumption, China is undergoing rapid industrialization and urbanization, and its energy demand will increase in a measured way. China's energy self-sufficiency remains above 90% and its future development still primarily depends on domestic energy. However, it needs to gradually improve its currently coal-dominated energy consumption mix. The fast-growing development of natural gas is very important for China to increase energy supply, optimize the energy mix, and improve the quality of the environment.

China has a solid resource base for accelerating natural gas development. Recoverable resources of China's conventional gas amount to 22 trillion cubic meters. Its coalbed methane amounts to 11 trillion cubic meters. By the end of 2008, China's cumulative proved recoverable reserves of natural gas reached 3.87 trillion cubic meters, despite a rate of proved reserves at merely 17.6%. In China, the industrialized production of tight gas was launched, coalbed methane production just rolled out, and resource-rich shale gas has yet to be developed.

China is still at the early stage of developing natural gas resources. Its gas production reached 77.5 billion cubic meters in 2008 from 27.2 billion cubic meters in 2000 with an average annual growth rate of 14%. China's vast gas resource base and its fast growth rate provide favorable opportunities for foreign cooperation.

China is the most promising natural gas market in the world. In recent years, China built a number of long-haul pipeline facilities such as the West-East Pipeline and the Shaanxi-Beijing Pipeline, both of which stimulated rapid growth in natural gas consumption. China's natural gas consumption dramatically increased to 80.7 billion cubic meters in 2008 from 24.5 billion cubic meters in 2000 with an average annual growth rate of over 16%.

Currently, natural gas accounts for 3.8% in the energy consumption mix and is estimated to reach 8% to 10% by 2020. This also means that, by 2020, China's total demand for natural gas could reach approximately 300 billion cubic meters, and its natural gas import could reach 80 billion cubic meters. China's fast-growing natural gas consumption promotes domestic gas exploration and development as well as provides more market opportunities for the rest of the world.

CNPC is China's most important oil & gas producer and is ranked among the world's top 50 oil companies. Accelerating natural gas development is one of CNPC's strategic decisions to realize low carbon and sustainable development. Into this new century, CNPC's proven oil in place has exceeded 500 million tons for five consecutive years, and its gas in place has exceeded 300 billion cubic meters for four consecutive years, with gas production growing at an average annual rate of 16%. In 2008, its crude oil production and natural gas production reached 108.25 million tons and 61.7 billion cubic meters, respectively, accounting for 56% and 80% of the country's total production, respectively.

For decades, CNPC has primarily produced crude oil. But with the fast-growing natural gas business, it is estimated that CNPC will produce more gas than oil before 2015, which could significantly contribute to China's oil supply security and low carbon development.

CNPC has been an active participant in international oil & gas cooperation. In recent years, the company has made remarkable progress in the area of international natural gas cooperation. In partnership with Shell, the Changbei gas field development project in China is expected to increase this gas field's annual production to 3 billion cubic meters, accounting for nearly 5% of China's total natural gas production. In partnership with Chevron, nearly USD 4 billion will be invested in the Chuandongbei gas field development project, which has a designed production capacity of 7 billion cubic meters. By far, the latter endeavor is China's largest onshore foreign cooperation project.

CNPC has been investing heavily to accelerate the construction of natural gas infrastructure and strategic channels. By the end of 2008, China had constructed 30,000 kilometers of natural gas trunk pipelines, twice as long as in 2000, among which, CNPC accounts for 70%. The four major gas areas—Tarim, Changqing, Southwest and Qinghai—are interconnected, which creates favorable conditions for China's fast-growing natural gas development.

In addition, CNPC has put the construction of the routes connecting the major gas import sources into full swing: the Central Asia Gas Pipeline was put into operation recently; the Sino-Myanmar pipeline was commissioned for construction; importing gas from Russia is under preparation; and LNG import moves forward at a rapid pace.

As a major, socially responsible company, while accelerating the development of its core oil & gas business, CNPC constantly improves development methods and accomplishes clean and intensive production by adopting the principles of material reduction, resource recovery and safe treatment. Since 1999, the total discharge of major pollutants such as COD, oil and sulfur dioxide has dropped by 6.7%, 22% and 4.2%, respectively.

CNPC is implementing a number of energy-conservation and emission-reduction initiatives in a bid to cut energy consumption of industrial added-value per ten thousand Yuan by over 20% and cut the total discharge of oil, COD and sulfur dioxide by 10% from 2005.

Ladies and gentlemen,

For years, CNPC has upheld its business philosophy of "Caring for Energy and Caring for You" and adhere to its commitment for harmonious development. It is our responsibility as well as our commitment to society to constantly secure a reliable energy supply and achieve clean energy development.

We sincerely hope to expand substantial exchanges and cooperation with domestic and overseas enterprises and research institutes in areas of gas exploration and development investment, gas trading, gas technology research as well as energy-conservation & emission-reduction technology, in order to contribute to sustainable energy development and low carbon development in China and the rest of the world.

Thank you!


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