00:00We've talked about the disruptions that we've seen in this part of the world.
00:03I think most of our guests have talked about China being a little bit more better positioned in terms of
00:09energy security.
00:10Walk us through how vulnerable do you think China is to these disruptions that we're seeing in the Strait of
00:14Hormuz?
00:16Sure, happy to do so.
00:17So China imports about half of its crude oil and almost a third of its LNG from the Middle East.
00:25Almost all of that transits the Strait of Hormuz.
00:29So that's a lot of oil and LNG that's not getting to China right now.
00:33However, China does have some tools at its disposal to manage disruption in its supplies from the Middle East and
00:41through Hormuz.
00:42And the main one is its strategic and commercial oil reserves.
00:47China has been building and filling strategic and commercial reserves for over two decades precisely to be prepared for a
00:55moment like this.
00:56China has about 1.4 billion barrels in storage.
01:00So even if all of China's crude oil imports from the Middle East were cut off for the next six
01:07months, China does have enough supplies that it would be able to cover that.
01:13Okay, so can we make the assumption minimal disruption?
01:19So I think if China does choose to draw down on its reserves, yes, minimal supply disruption, LNG is a
01:29little bit of a different story.
01:31My understanding is that China's natural gas storage is not on par with its oil storage.
01:40However, if you look at China's LNG imports from Qatar, then that counts for almost all of China's LNG imports
01:49from the Middle East.
01:51That's only about 6% of China's total natural gas supplies.
01:57And that would be imports plus domestic production combined.
02:02Right.
02:03How do you think this crisis does affect the energy transition that China is trying to undergo right now?
02:10Where are we in terms of the timeline here?
02:11Do you think that this actually the situation in Iran could actually shift or accelerate that shift towards renewable energy
02:18and really reduce its dependence on the Middle East?
02:21So I think the current crisis in the Middle East absolutely vindicates China's big push to electrify everything, notably road
02:31transport.
02:32And I would not be surprised if we see the turmoil in the Middle East, prompting China to sort of
02:40be even bigger and bolder in terms of accelerating its move to cleaner energy and to continue to electrify everything.
02:51So in terms of the short term alternatives and our reporter just earlier on talked about how I think what's
03:00interesting is you mentioned gas and obviously Qatar is a massive global producer of gas.
03:06But China also has Russia.
03:08I wonder what options China can turn turn to short term.
03:11So it's not so as they avoid dipping into their strategic reserves, too.
03:16So I think short term, there probably is going to be a little bit of pain with respect to the
03:23disruption in supplies from Qatar.
03:25However, China is rich in coal resources.
03:30And so switching to coal in the power sector, for example, is something that could be done.
03:36And then looking at Russia, Russia is China's largest supplier of natural gas by both Pipeline Gas and LNG.
03:46Right now, however, the power of Siberia Pipeline is operating slightly above capacity.
03:53And new pipeline capacity from the far eastern route isn't scheduled to come online until 2027.
04:00So there's not much that can be done in terms of increasing pipeline gas to Russia.
04:09There might be more flexibility on the LNG side.
04:14How are you assessing this Iran conflict and war with other previous conflicts?
04:19If you compare it to the Russian invasion of Ukraine, for example, you know, are we seeing the similar types
04:25of crisis levels that we've been seeing in terms of the energy impact to this part of the world?
04:30Or, you know, what people are pricing in right now markets do you think is a bit of an overreaction?
04:36So looking at this again, from the perspective of China, we're seeing a larger amount of oil flows to China
04:47being disrupted from this crisis than, you know, from the Russia-Ukraine war.
04:52So, you know, for Beijing, this is in terms of China's energy supply, energy supply security, this is a bigger
04:59deal.
05:02Erica, a final question for you.
05:07Just looking longer term, and I'm just looking at the range of possibilities, right?
05:11And this is obviously something that is largely a tail risk or unexpected.
05:16In the event that Iran under some future scenario falls under or aligns more with the U.S.,
05:25how does that change the premium that markets tend to build into that part of the world because of just
05:31geopolitical instability?
05:35So I think, again, looking at this from the China perspective, I think that, you know, China would be sort
05:43of will be very sort of pragmatic in, you know, sort of dealing with, you know,
05:49certainly the new leader that's in place now and future leaders of the regime in Iran as well.
05:56So, we'll continue to see.
05:56So, let's see.
05:56So, let's see.
05:56I'll see.
05:57I'm going to see.
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