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Net-zero targets threaten Russia’s hopes of

pivoting to China for oil and gas exports

ENERGY BEIJING’S commitment to reach net zero by
TRANSITION 2060 could reduce the potential for Moscow to
redirect its gas and oil exports away from Europe
towards China.
It will be neither quick nor easy for Moscow
to pivot its energy exports from west to east,
Wood Mackenzie vice-chairman for Energy in
Asia Pacific Gavin Thompson said. Any move
towards China comes as Europe is looking to
reduce its reliance on energy imports from Rus-
sia, as direct result of the Russian invasion of account for over 80% of supply by this time. Rus-
Ukraine on February 24. sia will see itself as critical to meeting this and
“A strong European Union cannot be so reli- helping China diversify its crude imports.
ant on an energy supplier that threatens to start a Meanwhile, Wood Mackenzie’s ETO pre-
war on our continent,” said European Commis- dicts that Chinese gas demand will increase for
sion President Ursula von der Leyen. another two decades before peaking in the mid-
For example, Germany has already brought 2040s at above 660bn cubic metres.
forward plans to accelerate its green energy tran- Around half of China’s demand will be met
sition to wean itself of Russian gas. Germany will through imports, though this could be higher
now aim at 100% renewables in electricity gen- if domestic unconventional gas disappoints.
eration by 2035, compared to a previous goal of Despite these growth forecasts, China’s net-
all-renewables “well before 2040.” zero targets will require massive and immediate
“After all, the events of recent days and weeks efforts to decarbonise, Thompson said.
have shown us that responsible, forward-looking The world’s ability to meet the Paris Agree-
energy policy is not just crucial for our economy ment targets of 1.5 degrees will largely be deter-
and our climate. It is also crucial for our secu- mined by China. The country is near-90%
rity. This means that the faster we make progress dependent on hydrocarbons and produces
with the development of renewable energies, the around 11bn tonnes of CO2 per year.
better,” German Chancellor Olaf Scholz told the This figure is also rising, with China’s CO2
German Parliament. emissions growing 4% in 2021, rising 5.5% above
Russia has already invested massively in pre-pandemic (2019) levels. Coal consumption
upstream production and export infrastruc- was 5% above 2019 level, oil 8% and gas 21%,
ture to supply China, Thompson noted, backed according to official figures.
by eye-watering loans from Chinese banks Wood Mackenzie’s Accelerated Energy Tran-
and long-term contracts with Chinese energy sition 1.5 ˚C scenario (Global Net Zero 2050)
The world’s companies. forecasts that China’s oil demand will tumble to
China now gets around 14% of its crude under 5mn barrels per day by 2050 and require
ability to meet imports from Russia. And while only 7% of its only around 3mn bpd of imports. Gas demand
the Paris total gas demand is currently met though the halves to just over 300 bcm by 2050 compared to
Power of Siberia pipeline and Russian LNG, the ETO. Domestic production could potentially
Agreement China’s gas imports from Russia are rising rap- meet all this demand.
Achieving the outcome forecast in our AET-
idly. A symbiotic energy relationship between
targets of 1.5 Russia and China looks strategically compelling, 1.5 scenario for China is not impossible, but a
broader approach is required, Thompson said.
Thompson said.
degrees will Chinese economic expansion means that for As well as China’s current emphasis on renew-
largely be Moscow, having an energy-deficient economic ables, more policy support and investment is
needed in low carbon hydrogen and carbon
superpower on your doorstep makes diversifica-
determined by tion away from Europe a less daunting prospect. capture in order to reach net zero.
However, increasing consumption of hydrocar-
An estimated $400bn in cumulative capex is
China. bons imported from Russia clashes with China’s required for China’s domestic green hydrogen
commitment to achieving net-zero emissions by electrolyser capacity alone.
2060. Put simply, China’s net-zero 2060 targets
Thompson noted that Wood Mackenzie’s require the total transformation of the country’s
own forecasts show that in its Energy Transition energy system and a move away from oil and gas
Outlook (ETO), China’s oil demand peaks in dependency. If China’s leaders follow through in
2027 but a modest decline curve keeps it above meeting their 2060 target, then then the need for
13mn bpd by 2050. major oil and gas import projects from Russia
With falling domestic output, imports will disappear.™

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