To realize China's modernization of economy， two approaches areindispensable- further industrialization and urbanization. But neithercan we get to without sufficient energy supply. The problem is how wewill deal with the increasing demand for energy.

Nearly 70% of China's primary energy is derived from its vastcoal reserves - the second in the world. But coal is an aggressive pol-lutant， and one of the main sources of greenhouse gases. What's more，most of China's coal mines are far from the centers of economic activi-ties， thus creating problematic transportation bottlenecks. Gas， whichis much cleaner， is in limited supply and faces similar geographicalchallenges， requiring costly pipeline infrastructure. The spectacularcar boom has made China the second largest consumer of oil in theworld (after the U.S.). This has put considerable pressure on energysupplies， and with imports from such countries as Saudi Arabia， thegeopolitical tensions are not negligible.

By Editor

The modern industrial world isunderpinned by energy and alsodriven by energy. Today 80%of the world's energy comes from coal，oil and natural gas. China is known asa country and also one of the largestenergy suppliers in the world. Officialstatistics show that China consumed 2.46billion tons of standard coal in 2006.Among this figure， coal consumptionamounted to 2.37 billion tons， crude oilconsumption reached 0.32 billion tonsand natural gas， 55.6 billion cubic me-ters.

Coal

Any discussion of China's energybegins with coal. Coal is the backboneof China's energy supply and it has beensince the earliest days of its industrial-ization. Nearly 70% of China's primaryenergy consumption (by fuel) comesfrom its vast coal reserves - the secondlargest in the word， accounting for 13%of the world's total. With the advantageof reliable and cost-effective， coal hasbecome an indispensable energy andmaintains its domination in China's en-ergy mix.

However， coal is an aggressive pol-lutant， and one of the main sources ofgreenhouse gases， threatening the globalclimate and people's living environment.What's more， most of China's reservesare not where the coal is most needed.China's largest coal deposits are in theNorth， while most of its economic ac-tivities are in the East and South regions.

One obvious solution would be toproduce electricity in the North， wherethe resources are， transmit the energyto the South in the form of electricitythrough high voltage transmission lines.

China is also pushing the develop-ment of various new technologies toconvert coal into liquid and gaseousfuels， not only to reduce China's relianceon coal and its dependence on foreignsources of oil and gas， but also to miti-gate the environmental impacts of coal.Sulfur

China's principal source of airand water pollution -- is removed as anintegral part of the gasification process.The world's first coal-liquefaction plantis being built in Inner Mongolia by thestate owned Shenshua Group and isscheduled to be completed in 2008.

Oil

China enjoyed a long history of en-ergy self-sufficiency. This history cameto an end in the late 1990's when Chinabecome a net energy importer. This isnot to suggest that China， like Japan， hadinsufficient energy resources of its own

its reserves of coal were still plentiful

but demand for oil began to outstripdomestic supply in 1993; its overallenergy balance was broken a few yearslater.

In 2003， China became the secondlargest consumer of petroleum in theworld after the US. Its demand in 2004stood at 6.37 million barrels per day(mb/d) - global demand was about82mb/d. With limited domestic supplyof its own， imports have been China'sprincipal means to satisfy the growingdemand. The spectacular emergence ofthe automobile in the Chinese economyhas intensified. China's thirst for oil willnot be quenched any time soon.

Natural Gas

It is widely accepted that natural gashas become increasingly important inthe economic world. The largest futuregrowth in terms of fuel share in Chinais expected to come from this hydrocar-bon， particularly for the generation ofelectricity， currently dominated by coal.The principal reason is environmental.

Natural gas is also vastly more ef-ficient. Modern gas-fired combined-cycle plants can convert about 60% ofthe energy contained in natural gas intoelectricity. By contrast， coal-fired plantsconvert only about 40%. In natural gaslies the potential to make China's elec-tricity generation greatly more efficient.

Another very important reason forfurther diversification of China's fuelmix are the transportation bottlenecksthat have arisen from coal， in particularsince 2002 following the steep rise indemand for coal. As mentioned in theintroduction， China suffers from a geo-graphical mismatch between its energyresource concentrations and its centersof economic activity. This is also thecase for natural gas.

Natural gas faces an importantcommercial barrier: it remains expen-sive relative to coal， certainly withoutthe inclusion of environmental costs.

As with oil， China's domestic natu-ral gas supplies are limited. Gas importsare expected to account for 27% of pri-mary gas supplies by 2030. An impor-tant source of gas import will be in theform of liquefied natural gas (LNG).

A substantial number of LNG ter-minals are planned along China's east-ern coast. It is estimated that by 2011installed LNG processing will accountfor 20% of installed capacity in the AsiaPacific.