Chinese Coal & US-China Coal Trade Kevin Jianjun Tu, Senior Associate Carnegie Endowment for International Peace The Energy Bar Association & Asian Americans in Energy, the Environment, and Commerce Washington DC May 13th, 2013

Drivers Underlying Global Energy Trend Source: BP World Statistical Review 2012, NBS, U.S. Census Bureau. 70% 30% 23% 4.0% 24% 27% 0.7% 5.2% 8.4% 18% 34% 37% CategoryAbsolutePer capita Coal Oil Gas Nuclear Hydro Renewables Energy CO China/U.S. in 2011

China: a Hybrid Economy at Crossroad Source: World Bank, IEA, own estimation

Concern of Energy Security Source: China Customs.

Dependency on Foreign Oil: China vs. US Source: NBS, US EIA. CNOOC  Unocal (2005) CNOOC  Nexen (2012) ChinaU.S.

Source: US EIA, NBS, ERI, IEA, own estimation. Environmental Constraints 68% 64% 24% 13% 19% 17% 22% 10% Gt of CO 2 Emissions

7 Chinese Coal Value Chain 2 nd largest coal reserves behind U.S. Distribution of coal resources Lack of coking coal Quality deterioration of thermal coal Coal ProductionCoal Transport Coal Resources Coal Use 46% of global total 80% global fatalities in early 2000s Half by key SOEs, 1/3 by private mines Half by ultra-small mines in > minimal 47%of global total half Chinese coal used for power generation, 9% for iron & steel, 7% for non-metal minerals, 5% for coal chemicals National coal consumption cap 48% of national coal output was shipped by rail 36% by major coastal ports 15% by inland Integrated railway + coastal marine transport Bottlenecks

Coal Exports Peaked in 2003 China encouraged coal exports Source: NBS and China Customs. Chinese Coal Imports/Exports  Global coal trade is about one third of China’s domestic coal market.  China became a net coal importer in  China passed Japan as the world’s largest coal importer in  China’s coal imports in 2012 up 58%, reaching 289Mt.

Source: China Customs. China’s Coal Imports by Country Mt

At least 6 coal export facilities proposed along the West Coast with aggregate capacity at >120 Mt/annum

Source: Energy Review. Sources of China’s Gas Supply bcm Can conventional fields deliver as expected? Problem with CBM development. Is coal-to-gas compatible with China’s conservation goals? Can shale gas be kicked off? Can pipeline gas deal with Russia overcome pricing dispute? Is U.S. a potential LNG supplier?

Thank You !