The Energy Industry in Xinjiang, China: Potential, Problems, and Solutions [PRINT VERSION]

The autonomous region of Xinjiang has a strategic position in China's economy, yet several conditions limit the most effective use of its fuels. This article provides an overview of the situation. A more detailed version, with maps and tables, appears here under the same title.

Since ancient times, the Xinjiang Uygur Autonomous Region (Xinjiang) has held a particularly important position in China's energy strategy. Xinjiang, in the northwest of China, accounts for one-sixth of China's land mass. It borders on Russia, Kazakhstan, Kyrgyzstan, Tuck Kyrgyz, Pakistan, Mongolia, India, and Afghanistan, with a land border more than 5,600 km.

Xinjiang is not only an important energy source for China but also connects China with Russia and other central Asian countries. Therefore, promoting development of the energy industry in Xinjiang is of extremely vital significance not only for economic and social development of the region but also for China's energy supply and energy security.

Energy Development Potential

Xinjiang is positioned as China's ''national energy strategy base'' because of its rich energy resources. Due to its superior geographical position, energy development in Xinjiang has a huge market. The technical level of energy exploitation and utilization in Xinjiang has gradually improved under relevant policy guidance. All these circumstances position Xinjiang's energy industry for growth.

Total reserves of natural gas, coal, and other fossil resources in Xinjiang account for more than 20% of China's energy reserves, placing it in first place for fossil fuel reserves. Xinjiang's wind power and solar energy resources are ranked second, while its theoretical hydropower reserves rank fourth.

Fossil. Coal, oil, and gas account for 38%, 21.5%, and 23.3% of national reserves respectively. To give some idea of the scale of resources, among the 60 coal fields, the Turpan-Hami coalfield reserves alone are predicted at more than 500 billion t.

Oil reserves in Xinjiang total 23.4 billion t, and gas resources are roughly 13 trillion m3, accounting for 23.3% of the entire onshore gas resources in China. Xinjiang is considered by geologists to have the most potential of all provinces for oil and gas exploration in China.

Renewables. Renewable energy (RE) in Xinjiang has huge exploitation potential. Theoretical reserves of water resources for hydropower production are 38,178.7 MW, or 5.6% of the national total. The quantity that can be technically exploited is 16,564.9 MW; the quantity that can be economically exploited is 15,670 MW.

Wind power reserves are 960,000 MW theoretically, and 134,300 MW can be technically exploited.

Xinjiang is rich in solar energy resources and receives annual radiant energy of 5,430 to 6,670 MJ/m2 with about 2,550 to 3,500 hours of sunshine per year. Xinjiang's annual radiation intensity is 15% to 25% higher than other parts of China with the same latitude and in the Yangtze River region.

Current State of Energy Industry

Rich energy resources promoted development of the energy industry in Xinjiang, and a long-term energy development plan has been made based on the province's unique characteristics. However, in recent years, the trends of a single industrial structure and a higher proportion of coal energy utilization are rising. Meanwhile, energy resource waste, environmental pollution, and unconscionable use all exist in the production process.

Coal, Oil, and Natural Gas. Coal production in Xinjiang was, respectively, 24.35 and 143.27 million t in 2005 and 2014. From 2000 to 2014, annual oil production increased from 18.48 million t to 27.39 million t, accounting for 13.04% of total oil production in China. Annual production of natural gas is generally increasing from 10.66 billion m3 to 29.15 billion m3, accounting for 21.93% of natural gas production in China and ranking second nationwide.

By the end of 2014, prospective oil and gas reserves were 18.5% and 11.8%, respectively. The proportion of coal production has been increasing yearly generally, while the proportion of oil and gas production is declining.

Renewables. Renewable generation in Xinjiang comes largely from hydro and wind sources. Recently, photovoltaic (PV) solar power has achieved rapid development

By the end of 2014 the installed capacity of non-fossil energy was 15,690 MW, accounting for 34.44% of total installed capacity and higher than the 30.84% in 2013. Generation from non-fossil sources was 25.93 billion kWh-a 4.46% increase over 2013. Although development has been quick, RE currently provides only a small portion of power in Xinjiang.

Energy Industry Barriers

China attaches great importance to energy development in Xinjiang. In May 2010, the Central Committee and the State Council held a forum in Beijing, putting forward the development plan for Xinjiang. From then on, major energy companies increased their exploration and exploitation intensity. Although Xinjiang has good growth opportunities, development of the energy industry still faces two main problems: proved reserves are low, resulting in a high reserve-production ratio, and the percentage of primary energy that is exported is too high.

High Reserve-Production Ratio. As of 2014, proved coal reserves reached 307 billion t, accounting for 14.02% of predicted reserves of 2.19 trillion t. Even if coal production maintains an annual growth rate of 20%, existing reserves are sufficient for more than 100 years. The third round evaluation of oil and gas resources in Xinjiang showed that predicted reserves of oil and nature gas are 20.9 billion t and 10.4 trillion m3, respectively. In 2014, the production of oil and natural gas in Xinjiang were 27.39 million t and 29.15 billion m3, respectively. With this level of production, proved and predictive reserves of oil in Xinjiang can be mined for about 140 and 780 years, respectively, while proved and predictive reserves of natural gas can be mined for 50 and 410 years, respectively.

This phenomenon of low proved reserves and high reserve-production ratio indicates that the strength of exploration and exploitation of fossil energy in Xinjiang is still very weak; however, it also indicates a huge opportunity for future development.

High Levels of Exports. In 2014, 143.27 million t of coal was produced in Xinjiang, of which 96.03 million t were used for processing and conversion, accounting for 67.03% of total production. Quantities for power generation, heating supply and coking were, respectively, 42.19, 18.93, and 30.65 million t, accounting for 43.93%, 19.71%, and 31.91% of intermediate consumption. Only 3.1% was used for advanced conversion, such as for the coal chemical industry, indicating huge potential for future development.

Also in 2014, coal exports were 17.04 million t, accounting for 11.89% of total production. Although the absolute amount of coal exported is increasing, the percentage is decreasing.

In 2014, oil production in Xinjiang reached 27.39 million t, while oil exports reached 26.16 million t, accounting for 55.60% of total oil production in Xinjiang, even removing oil imports of 10.93 million t. Most of the oil produced in Xinjiang is transferred to other provinces in the form of primary energy.

The large quantity of primary energy exported has become a bottleneck to further development of the energy industry in Xinjiang; the long-term export of primary energy products is bound to weaken the resource superiority of Xinjiang and goes against the long-range and industrial development of its energy industry.

Renewable Energy Problems. Currently, the development of RE in Xinjiang is stable. The government provides much support, attracting many institutional investors at home and abroad. At the same time, the mixed ownership economy was introduced into oil and gas pipeline construction, and the market investment and financing mechanism achieves sound development. However, the development of RE in Xinjiang still has problems.

Hydropower in Xinjiang accounts for only 14.68% of the theoretical reserves and 33.83% of the quantity that can be technically exploited.

By the end of 2014, grid-connected wind power capacity was only 4,810 MW, accounting for 11.76% of the total grid-connected power of 40,890 MW.

Although PV power had a late start, it has achieved rapid development in recent years with various investment promotion, capital introduction, and focused assistance from other provinces.

Meanwhile, the ability to transmit power outside the region is lacking. The weakness of the grid makes transmitting power outside of Xinjiang difficult.

Weak Technology and Workforce Capacity. At present, the professional platform for RE in Xinjiang is poor. Apart from a wind engineering technology center that is under construction, there are no institutions or laboratories specialized in RE research; fewer than 5,000 people are engaged in RE industry research. Therefore, every year Xinjiang needs to attract professional and technical personnel with RE experience either domestically or from abroad.

In addition, local universities have not yet created an RE major; the study of PV and wind power are also not academic subjects, so most specialized personnel are self-taught. Xinjiang has a shortage of RE professionals, aging knowledge, and a short supply of senior specialized and experienced personnel.

The lack of professional talent and lagging education have become the main factors restricting RE industry development in Xinjiang.

Proposed Solutions

Our analysis shows that proved reserves of fossil energy in Xinjiang are relatively low and that the exploitation and utilization rate of RE is insufficient. To solve these problems, multiple plans should be implemented simultaneously.

Increase Energy Production. Xinjiang has abundant energy resources, has been confirmed as one of the five comprehensive energy bases of China, and has been absorbed into "twelfth five-year plan of energy development." The policy environment is favorable for construction. The exploitation of fossil energy should be strengthened to construct large coal mines and oil and gas production bases. The government should accelerate the examination and approval efficiency and provide fiscal and financial support to the six large coal production bases. Concurrently, exploitation of RE should be accelerated. With peak-shaving support from fossil energy and hydropower, intermittent wind and PV power can be massively constructed to realize the comprehensive utilization of energy.

Improve Energy Transport and Utilization. Energy utilization in Xinjiang currently is insufficient because energy demand for economic development is far below its supply. To solve this problem, energy channels should be constructed to realize the optimal resource allocation of Xinjiang's abundant energy nationwide.

Achieving that goal would include constructing a strong power grid. Furthermore, gas transmission eastward from Xinjiang should be implemented. All of the local gas, imported gas (from Central Asia and Russia), and coal-based natural gas should be comprehensively considered and transmitted to the southeast coastal region and mid-east region.

Meanwhile, the energy utilization of local users should be accelerated. First, the government should implement fundamental public service in urban and rural areas. Second, energy infrastructure construction should be strengthened. For cities with high energy demand, combined heat and power is a good way to realize the multistage utilization of energy.

Build a Technology and Talent Base. It is important to implement industrial clusters to accelerate technology upgrades that enable development of related industries (such as natural gas vehicles) from existing industries such as coal, oil, and gas mining. Meanwhile, those industries should be developed with energy conservation and emissions reduction in mind.

Additionally, the construction research base should be strengthened and professional talent for RE should be cultivated. The major consideration is to introduce talent and retain existing personnel by providing higher payment. Beyond this, local universities and colleges should establish the study of RE to systematically cultivate professionals. However, because of the weak existing foundation, achieving workforce goals by using this method is difficult in the short term.

Necessary Change

Large-scale energy development in Xinjiang provides strong support to industrial development and construction modernization in China; it also provides energy reliability for the development of other provinces. However, the energy industry in Xinjiang is severely limited because it is restricted by the low development level of the local economy and the distance from China's main energy consumption area.

The state is required to increase Xinjiang's economic and social development and is asking other provinces to assist. Such assistance could both promote Xinjiang's development and provide energy security for the larger economy and society, thus promoting the sustainable development of Xinjiang.

This work was supported by the National Natural Science Foundation of China (Grant no. 71271082) and the Fundamental Research Funds for the Central Universities of China (Grant no. 2014XS53). a-

-Jinhui Duan, Ming Zeng, and Yanfang Ju are affiliated with the School of Economics and Management, North China Electric Power University; Shuying Wei is affiliated with the College of Geophysics and Information Engineering, China University of Petroleum.

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