China Market Insider Sinopec Aims to Become World's Largest Hydrogen Supplier

Author / Editor: Henrik Bork* / Ahlam Rais

China's energy sector and the country's petrochemical industry are preparing for a future with less fossil fuel. The ‘development of non-fossil energy’ should be a priority from now on, according to a recently published white paper by the Chinese Government, the main points of which PROCESS (China) summarizes in an analysis.

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PROCESS regularly reports on the Chinese chemical and pharmaceutical market with its ‘China Market Insider’ format.
PROCESS regularly reports on the Chinese chemical and pharmaceutical market with its ‘China Market Insider’ format.
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Beijing/China – White papers are important propaganda publications of the Chinese Communist state and party leadership. They are full of statements of intent and should be read with caution. However, national and provincial governments often follow the goals defined in these white papers with concrete policy measures.

The latest white paper, titled ‘Energy in China's New Era,’ released on December 21 by the State Council, the highest body of the Chinese Government, therefore provides important insights into the future course of China's energy transformation and the framework for its petrochemical energy in the aftermath of the global Covid-19 crisis.

"China prioritizes non-fossil energy in its development and vigorously promotes the replacement of high-carbon energy with low-carbon energy, as well as the replacement of fossil energy with renewable energy," PROCESS (China) quotes from the white paper. Solar energy should be further expanded and the supply of solar power to the country's power grid should be improved, the white paper says.

Energy generation from wind, water, biomass and other renewable energy sources is also to be further expanded, and the use of hydrogen as an energy carrier is also to be promoted. Many of the goals thus signal a stable and cautious continuation of China's recent energy policy – a deviation from China's gradual and steady energy turnaround towards renewable energy sources due to the Corona crisis has been just as absent as drastic accelerations of this energy turnaround as demanded by environmentalists.

This continuity is also clear in the white paper's position on the use of coal for China's energy production. "Coal remains the basic energy source" of China, the official Xinhua news agency quotes from the white paper. China's annual production of raw coal has ranged between 3.41 and 3.97 billion tons since 2012, Xinhua writes.

To be sure, China is gradually reducing the overall share of coal in the country's energy mix. In 2019, coal was still responsible for 57.7 per cent of the energy produced in China. In the New Year, according to government plans, this share will continue to be reduced very slightly, to 57.5 per cent. By comparison, it was 68.5 per cent in 2012. In the same period, the share of non-fossil energy sources in China's energy mix has grown from 9.7 to 15.3 per cent, according to the new white paper.

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At the same time, however, China continues to invest heavily in new coal-fired power plants. China is already the world's largest consumer of coal and also the biggest climate polluter in terms of carbon dioxide emissions. Nevertheless, some 250 gigawatts of new, additional coal-fired power plants are currently in the pipeline – more than the entire capacity of the U.S. and enough to supply all of Germany with energy, the Reuters news agency quoted last year from a study by international energy institutes.

The white paper does little to address this, but emphasizes China's intention to build more and more ‘clean’ coal-fired power plants. The white paper calls for "vigorously promoting safe, intelligent and green extraction and utilization of coal," PROCESS (China) writes.

Critics question how the construction of more coal-fired power plants fits in with China's ambitious climate protection goals announced by President Xi Jinping last September. Xi had announced that the People's Republic wanted to have a carbon-neutral economy as early as 2060 and reach the peak of its carbon dioxide emissions in 2030.

Indeed, China is trying to reconcile various goals, including environmental protection in its notoriously smog-ridden metropolises and ambitious plans to become the world leader in green technologies, on the one hand, and securing energy supplies for its billion-strong population and rapidly expanding economy, on the other. Coal is still seen as a reliable source of energy that can be generated domestically and is therefore independent of geopolitical tensions, from which China can only gradually and slowly turn away.

Domestic oil production therefore also remains stable and is estimated by official sources at 193 million tons for the current year. The "production of new oil wells in the west" of the country is to be accelerated, as is the development of offshore resources of oil and gas in Bohai Bay, the East China Sea and the South China Sea, the new white paper says.

Nevertheless, China's petrochemical industry is now entering a "critical period of transformation towards low-carbon" alternatives, comments the Chinese business newspaper Jingji Ribao. Not only are non-fossil fuels steadily gaining in importance, but over the next five years, "the growth rate of oil demand will slow down substantially and approach a peak," the business daily said.

China's leading petrochemical groups have recognized the signs of the times, writes the South China Morning Post newspaper. Sinopec, for example, has begun forging alliances with four of the largest solar energy companies in China to develop "green hydrogen projects," it said. "The transformation towards hydrogen energy should help Sinopec defy the eroding competitiveness of fossil fuels," the paper writes. The oil giant now aims to become the largest supplier of hydrogen energy, reports the South China Morning Post.

* Henrik Bork, a longtime China correspondent for the German Süddeutsche Zeitung and Frankfurter Rundschau, is managing director at Asia Waypoint, a Beijing-based consulting agency specializing in the China market. ‘China Market Insider’ is a joint project of Vogel Communications Group, Würzburg and Jigong Vogel Media Advertising in Beijing.

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