Energy-hungry China and energy-wasting Indonesia

Natalia Soebagjo, Shanghai

Less than one week before his departure, President Susilo Bambang Yudhoyono has postponed -- maybe even canceled -- his state visits to China, Thailand and Brunei. The fuel crisis is keeping him home and wisely so because fuel crises have in the past few years always been a politically hot issue.

Indonesia is faced with fuel supply problems due to increased domestic demand and rising global oil prices, with a dose of mismanagement added in as well. But Indonesia is not alone. Other countries in the region are facing the same problem also, especially China.

The major difference between Indonesia and China is that China's government is not strapped for cash and when the central government announces a policy, whether they like it or not, local governments have to follow accordingly, and likewise the people.

So tourists wanting to enjoy the spectacular night view of the Bund or the glittering downtown shopping area of East Nanjing Road in Shanghai would be disappointed as the lights have been dimmed and are switched off earlier. Tiananmen Square in Beijing is also not as bright as it used to be and the same is happening elsewhere in China.

This summer especially has been extremely hot with the mercury rising to 39 degrees Celsius. As a result, energy consumption has increased as people switch on their air-conditioners to fight the sweltering heat. In the meantime, industries continue to churn away, keeping the economy sizzling.

In Shanghai alone, electricity usage over the summer is expected to increase by over 12 percent to 19 million kilowatts and, determined not to let its citizens suffer from any total blackouts, the municipal government has taken various measures to manage energy usage more efficiently. These measures include ordering larger companies to shift production to off-peak hours and increasing the prices of peak level electricity usage to encourage them to do so; warning all industrial enterprises that they may face electricity rationing from now until the end of August so they can readjust or rearrange work shifts accordingly.

The government also told government buildings, malls, offices, hotels and entertainment venues to curb consumption. The general public has also been asked to use energy-saving lights, fans instead of air-conditioners and washing machines with timers.

Shanghai, one of the most vibrant economic centers in China, is also the biggest consumer of energy. It feeds its demand by building new power plants and by buying power from other regions. Shanghai began overhauling and building new power plants in its suburbs in 2003 so that by 2008 these plants will have a combined capacity of 28.3 million kilowatts. It is also going to receive five million kilowatts in power supplies from the East China Grid and the State Grid, plus a commitment for an additional four million kilowatts. In short, the government has anticipated the shortage and taken the relevant steps to address it.

At the national level, Premier Wen Jiabao recently launched an energy-saving campaign ordering government offices to keep air- conditioners no colder than 26 degrees Celsius, to switch air- conditioners and lights off when leaving the office, to use lifts less often, use energy-saving lightbulbs and to come to work wearing ordinary shirts without a jacket and tie, except when there are important official activities. A central circular was issued and local governments followed suit.

But such campaigns are just a small part of a bigger strategy to meet its energy demands. Analysts expect that in 20 years' time, China is going to consume nearly 13 million barrels of oil a day, or about 10 percent of the global total. A lot of it will be imported oil. Therefore, short-term energy saving campaigns, no matter how helpful, will not be enough.

Ever since he came to power, President Hu Jintao has been traveling the world -- Latin America, Southeast and Central Asia, Africa and Russia -- in search of new oil and gas sources. China is now the world's third, if not second, largest oil importer.

Since the mid-1990s, the Chinese have also been buying oil reserves and pipelines, although many observers believe that the Chinese have spent too much on assets that are not top quality or are in too remote areas. China's top three oil companies -- PetroChina, Sinopec and CNOOC -- have holdings in as many as 44 countries around the globe, including in Sudan and Myanmar. CNOOC's latest controversial bid for Unocal of the U.S. is another sign of China's intention to have a bigger stake in the energy sector, and they're willing to pay a premium for the opportunity. Still, despite all their efforts, the combined overseas reserves of China's oil giants are still small. Some estimates say they are only one tenth of the reserves of one big Western multinational such as BP.

Back home, the Chinese want to accelerate domestic oil exploration and production by investing billions of U.S. dollars in the industry. Its current domestic output is approximately 3.5 million barrels a day, just a little over a half of the 6.7 million barrels it needs. Much of this is from the Daqing oil field in Heilongjiang province but production there is decreasing.

Besides increasing supply to meet demand, China must also improve its inefficient use of energy. Compared to other countries, China does not use its energy efficiently. It uses 6.6 times more energy than Japan to produce the same unit of GDP. During July, for example, high-energy consuming industries such as cement producers and electroplating factories in Zhejiang province have had to temporarily stop or reduce production because the province is currently facing severe power shortages.

Another approach is to alter demand by changing consumption and use patterns. Hence, China is trying to attack the problem of its energy needs from all fronts because what is needed is not only a comprehensive and integrated energy policy, but also a policy that looks at the way China's overall natural resources and environment are managed. Not enough is being done to protect its environment and many believe that China's economic growth is being pumped up at the cost of the environment.

For a country accustomed to muddling through and working on a shoestring budget constrained by populist demands, political bargaining and the fickle fluctuations of the U.S. dollar, overcoming its fuel crisis and planning and implementing a long- term energy policy is not easy.

This is another area in which closer cooperation between China and Indonesia could be mutually beneficial, so we could learn from each other's experience.

A historian once said that the Chinese are a people with a millennia history of scarcity. In comparison we Indonesians have had a history abundance. Perhaps this explains why the Chinese are so determined to maximize what they have and we, on the other hand, tend to take for granted and squander what we have. But, as the saying goes, it's never too late to learn.

The writer works at the Center for Chinese Studies in Shanghai.