Five years after the announcement of China’s Belt and Road, the ambitious drive to build new infrastructure across Eurasia has produced a mixed track record on key issues such as its energy footprint, debt sustainability, and environmental impact.
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China’s interest in the Arctic seems to be driven by potential energy, commercial, and geopolitical benefits, but each comes with a caveat. First, the region has a wealth of energy and natural resources, boasting roughly 13 percent of the world’s undiscovered crude oil and 30 percent of undiscovered natural gas. While these oil and gas deposits are locked away under the Arctic seabed by thick ice sheets and harsh weather, the steady retreat of sea ice has paved the path to viable future extraction efforts. At present, China’s most significant link to the Arctic is through the Russian Yamal Liquified Natural Gas (LNG) project, in which Chinese companies hold stakes and provide significant financing. For its participation, China has secured long-term offtake of LNG from the project amounting to approximately 195 billion cubic feet per annum (or 4 million tons per annum). However, the appeal of Arctic oil and gas to global markets is subject to the cyclical nature of global oil and gas markets, as well as the future of other supply sources, including U.S. unconventionals. Arctic resource extraction remains difficult and expensive owing to the harsh climate, limited infrastructure, distance to manufacturing centers, and environmental sensitivities. These issues, which have hindered past onshore projects in Northern Russia and Alaska, will likely present even greater challenges for future offshore energy development efforts in the Arctic given adverse maritime conditions.