China’s Opportunity for Global Energy Leadership
October, 2007
By Robert A. Hefner III
China uses Peaceful Rise to describe its goal of sustained development and emerging global significance. To be
successful in this auspicious goal, China’s leaders are aware of the essential requirements of “internal stability”
and “external peace.” With China’s rapidly expanding economy, urbanizing population and growing
international stature, many of the essential elements for Peaceful Rise are in place. The greatest obstacle to
China’s rise is its unsustainable growth in the use of coal and oil. Coal and oil are remnants of 19th and 20th
Century industrial economies and are not the building blocks for a 21st Century superpower.
The answer to how to maintain “internal stability” and “external peace” while meeting the demand for rapidly
increasing energy consumption by the world’s largest urbanizing population lies in embracing an energy policy
that I call “The Age of Energy Gases” (AOEG). I should say at the outset that, in addition to natural gas, I also
consider wind, solar and hydrogen to be energy gases, as each in its natural state is a gas. Wind is a gas like any
other and solar power is derived directly from burning hydrogen gas of the sun.
The next great energy transition, like the transition from solid fuels (principally wood and coal) to oil (a liquid)
that took place in the 20th Century will, in the 21st Century, restructure economies, provide another great pulse
in global economic growth and redefine international power relations. The transition to the AOEG has already
begun, since the 1970’s natural gas has been consistently the fastest growing primary energy source in the
world1 and natural gas will be the essential bridge between unsustainable coal and oil fueled growth and totally
clean and sustainable hydrogen energy. Because hydrogen is the most abundant element in the universe2,
ubiquitous on earth and therefore virtually a limitless energy source, as well as being totally clean and highly
efficient, hydrogen should become civilization’s energy endgame. And because all of the technology necessary
for the hydrogen economy already exists, and has been tested and used, hydrogen is not a Star Wars ambition,
but a reality that can be achieved in the next 50 years.
By accelerating the transition to energy gases, China would become the global energy technology leader and
reap the significant economic benefits that will accrue from the early development of civilization’s most
important technology for life in the 21st Century.
On the other hand, it is doubtful that China can achieve Peaceful Rise by continuing its rapidly increasing oil
and coal consumption. Coal and oil are not a long-term option given their growing barriers to economic growth
and spreading pollution that are increasingly breaking down “internal stability” and putting pressures on the
global economic system and, therefore, “external peace”.
Coal accounts for about 70% of China’s energy mix3, and coal-fired generating stations are being constructed at
a breakneck pace. But coal is the technology of the Industrial Revolution and not the technology of the
Information Revolution. Coal-fueled growth is a step backwards into the 19th Century. China’s increasing coal
use is placing very real but unmeasured limits upon economic growth. Agricultural production suffers from the
pollutants that coal pumps into China’s air, soil and water. Sulfur, mercury and ash reduce visibility, create
dense fog, poison fish, reduce human productivity and add to increasing health care costs. Coal is killing the
grasslands of Inner Mongolia and spawning dust storms that choke Beijing and limit economic activity. These
external and real costs are increasingly spreading intolerable tensions within the population and putting at risk
the maintenance of “internal stability.”
“External peace” is being challenged by China’s rapidly growing oil consumption. China’s increasing use of oil
is beginning to create unsustainable geostrategic pressures that are already undermining China’s “soft power”
and threatening its global role as a responsible stakeholder. It will be difficult for the world to maintain
“external peace” if China follows America in its profligate and inefficient use of oil. By doing so, global oil
demand will rise to levels likely to create intolerable macroeconomic and geostrategic risks, volatilities and
pressures that cannot be sustained and will increase the probability of large global economic contractions or
even wars.
The AOEG path is not some dream that requires new technologies to be discovered but, on the contrary, an
energy path now underway and accelerating. Since the 1970’s natural gas has been growing rapidly and wind
and solar continue to grow at rates even faster than China’s economy. Hydrogen is already an important fuel
and hydrogen technology has been used for over 100 years; indeed, the first hydrogen fuel cell was produced
before the internal combustion engine.
What I advocate for China today is to recognize the true full-cycle costs of coal and oil to its economy and the
risks they bring to achieving Peaceful Rise. By so doing it will become obvious that the least cost energy path
forward will be to accelerate into the AOEG. I recognize that the AOEG strategy requires natural gas to be
globally abundant. As one who has explored for and produced natural gas as a principal target and not as a
byproduct of oil for nearly 50 years, I hold no doubt that natural gas resources are globally abundant, grossly
underestimated by industry and have no direct relationship to the quantities of the world’s remaining oil. What
is needed immediately in China is a government sponsored, globally comprehensive study of natural gas
resources, with particular emphasize on what is called “unconventional” natural gas reservoirs, those not
capable of containing or producing commercial oil. Over the last decade, the development of unconventional
natural gas added about 50% to America’s remaining natural gas resources4. Consider the following:

wherever coal and oil are found, natural gas also exists and the largest natural gas fields often have little
or no oil;

in the decade of the 1990’s the world’s newly discovered “giant oil and gas fields” contained about three
to five times more natural gas than oil5;

the oceans contain more Btu’s of natural gas hydrates than all the world’s coal6;

the world’s estimated supply of natural gas contained in unconventional reservoirs is about 30,000
trillion cubic feet7 or three times conventional natural gas and, like America, China and India will have
vast unconventional natural gas resources.
For policymakers whose decisions will have long-term consequences it is essential to see how global energy
transitions are ongoing and have moved like powerful waves through societies, beginning with coal’s
replacement of wood in the 1800’s that created the Industrial Revolution. Next, oil powered the post-WWII
economic expansion to the modern globalized world. But coal and oil are 19th and 20th Century fuel sources
that today are creating environmental, economic, and geostrategic limits to world growth.
My energy studies lead me to believe that there exists an elegant simplicity in these transitions and that they can
be best viewed not as individual fuels but in their basic forms of matter: gases, solids and liquids. The universe,
solar system, and earth are principally composed of gases followed by smaller quantities of solids. Liquids are
a much less stable form of matter and only exist in relatively small quantities.
We frequently hear that more than 70% of the world is covered by water. But how much is there really? On the left is an image of the Earth with all
water removed. On the right is a sphere representing all the water on Earth (oceans, icecaps, glaciers, lakes, rivers, groundwater etc.). To the far right
(tiny sphere) is the fresh water that is readily available to humanity to sustain life. Courtesy of Woods Hole Oceanographic Institution.
Therefore, natural gas is probably the most abundant fuel on earth, followed by solid coal and finally liquid oil.
Looked at this way, we can see that for more than 200 years civilization has been in a natural transition from
dirty, chemically complex solid fuels (wood, coal and I would include uranium) that use centrally located,
highly capital intensive and old, inefficient technologies, to clean, chemically simple fuels (natural gas, wind,
solar and hydrogen) that are the foundation for highly efficient, smart, distributed, less capital-intensive, modern
technologies. Civilization began with wood, principally carbon, and has been “decarbonizing” its fuel sources
for over 200 years. Today, about two-thirds of the energy atoms burned are hydrogen8.
By viewing energy sources in terms of their form of matter and as a percentage of the global energy mix over
time, the elegant simplicity of their long-term transitions becomes clear. By studying the history of energy
policy, we see how policies that fight against these trends fail by retarding economic progress and creating
excessive environmental damage that creates intolerable external costs to society, whereas the policies that
accelerate these great transitional waves become large successes by stimulating economic growth within an
increasingly environmentally sustainable economic system. Two excellent examples are:

In 1978, American President Jimmy Carter, mistakenly believing that U.S. natural gas supplies were
running out, signed energy legislation that banned the use of natural gas in power generation and created the
Synfuels Corporation to turn coal into natural gas. The result was that America had a 20 year glut of clean
natural gas and a boom in the use of dirty coal. Natural gas made from coal was uneconomical and not
needed, so the Synfuels program was a $25 billion (2007 USD)9 waste of taxpayers’ money and was
subsequently shut down as a complete failure.

In 1985, British Prime Minister Margaret Thatcher won her battle with politically entrenched coal
interests10. Since, coal use in England has declined from 33% of the energy mix to 19% today while natural
gas’s percentage has increased from 23% to 36%11. As a result, London was able to literally clean herself,
scrubbing a century of dirty coal from its majestic buildings and turning them back to glistening white
marble. Subsequently, London has become one of the most sought after jewels of international cities and
reestablished herself as a vital city of international commerce.
So today, China has before it a century long opportunity to ride the AOEG wave to leadership in the
technologies most important for the 21st Century energy revolution. Unlike the western democracies whose
societies generally think and act short-term and have great difficulty changing direction short of catastrophic
circumstances and whose energy infrastructures are deeply imbedded, built upon 19th and 20th Century
technologies, China has 5,000 years of history that includes global technological leadership and a people with
long-term sensibilities and a form of government that can create policies for the long-term good. So because
China will continue to build vast new infrastructure over the next 50 years, possibly equal to three or four
America’s, China has the opportunity to leapfrog western societies into the 21st Century by riding the wave of
energy gases. As Chou En-lai said, “The helmsman must guide the boat by using the waves, otherwise the boat
will be submerged by the waves.”
1
U.S. Department of Energy, Energy Information Administration, International Energy Outlook 2004, pages 3, 8.
Hydrogen Now!, “What is Hydrogen?”, www.hydrogennow.org/Facts/WhatIsHydrogen.htm, 4/26/2007.
3
BP Statistical Review of World Energy 2007, page 41.
4
“Shale gas plays expand,” E&P magazine, March 2007; “When your gas reservoir is unconventional so is our solution: Shale gas,”
Schlumberger white paper, October 2005.
5
AAPG Memoir 78, Giant Oil and Gas Fields of the 1990’s, 2003.
6
“Methane on Ice”, Chemical & Engineering News, August 22, 2005, Volume 83, Number 34, pp. 16-17; E-Mail communication
from Arthur H. Johnson, Hydrate Energy International, May 21, 2007: “The best global estimates of gas hydrate in place come from
the USGS World Energy Assessment. The estimates span three orders of magnitude: 100,000 to 270,000,000 tcf.”
7
“Unconventional Gas Reservoirs,” presented by Chris Hopkins, President, Data & Consulting Services, Schlumberger Oilfield
Services, at Aspen Institute 2007 Aspen Forum on Global Energy, Economy & Security, Aspen, Colorado, July 8-11, 2007.
8
Amory Lovins, Rocky Mountain Institute, E-Mail communication, July 9, 2007.
9
“Sunset for Synfuels Corp.?”, The Energy Daily, January 4, 1984 (converted to 2007 dollars).
10
Online excerpt from Commanding Heights, Daniel Yergin and Joseph Stanislaw, p. 105-113,
www.pbs.org/wgbh/commandingheights/shared/minitextlo/prof_margaretthatcher.html.
11
BP, historical data from 1965-2006, www.bp.com.
2