IEA should shift east to China, says former chairman - China Dialogue

IEA should shift east to China, says former chairman

Chinese membership of the International Energy Agency (IEA) should be a top priority, argues former chairman Nobuo Tanaka, who says Europe fears losing control of the organisation

For the past few years you have constantly urged China to join the IEA, why do you see this as an important matter?

Nobuo Tanaka:
I think joining the IEA will be beneficial to China. Within the global economy and the G20, China already has an important standing. China should participate in global energy governance and the IEA has a big market influence including oil and electricity.  It’s simply a win-win situation for both China and the IEA when China joins.

Why do you think the Chinese government has been cautious about joining?

Zhang Guo Bao (former director of China’s National Energy Bureau) and I have spoken on many occasions. China’s view on this is that what stops China from joining is that it is not an OECD member state. China wants to join the IEA, but cannot, as it is not part of the OECD. If China expresses a willingness to join, discussions will be made and it may even lead to a change of rules. This is not hard. Mexico is already part of the IEA but they are not part of the OECD.

Is the requirement for at least 90 day reserves of crude oil an obstacle to China joining the IEA?

The oil count is not limited to just the government petroleum reserves, commercial oil reserves can also be counted. A lot of countries actually don’t make the oil count. Take New Zealand and Luxembourg for example, they "lease" oil stocks from other countries. If China does not have the oil count, they can do the same. In addition, it is not hard for China to fulfil the requirement of having 90-day reserves of oil. I remember that China already has over 30 days of [state] reserved oil and commercially, there are around 60 days. If you put the two together, the requirement will be fulfilled. I estimate that China already has over the requirement of 90 days reserves.

China publishes its energy statistics every year; do you think this is enough to meet the IEA’s requirement of sharing oil data?

The IEA has a lot of data to hand, such as the national oil production, consumption data and not just the level of strategic reserves data. The IEA require a very high frequency of data, such as monthly or even weekly data. China’s statistical data is progressing so this should not be an obstacle to joining.

There is a suggestion that because China shares good relations with OPEC, it is unwilling to step into international affairs regarding the two organisations. Do you agree?

I am not sure. Both Japan and Europe are consumers to OPEC. IEA and OPEC need to communicate and work closely with each other. At the same time, IEA does not support the price of oil at the extremes. For example, if the price is too high, the world economy will be affected and if it’s too low, we will have no motivation to invest in new oil fields. Prices should remain in the middle. Currently, both OPEC and IEA work very closely together. For example, two years ago during the civil war in Libya, we released some oil reserves. Both the OPEC chairman and the Saudi Arabian oil minister are in frequent contact.  We want to know how much they have increased production by. If this is unknown, we cannot determine the amount of reserves released and this is necessary for market requirements. In the past we were a little hostile, but now there are a lot of talks going on.

How many countries are currently ‘prospective’ member countries of the IEA?

There are seven countries (China, India, Russia, South Africa, Indonesia, Mexico and Brazil).

What are the views of the IEA director Mary van der Hoeven towards membership for China?

Her views are not as strong as when I was in office. I have already done a lot however; the Europeans are a bit more reserved on this case as they are worried that if China joins, they will lose control of the organisation.

Global energy consumption is moving east. Many people now think that global energy governance should follow and that the IEA headquarters in Paris should also move east. How do you see this?

Yes, the focus has already moved eastward from Europe. We need more Asian country members. Not only China but also, big consumer countries like India. We need closer cooperation with ASEAN countries. They are also big consumers. Take Indonesia for example, they were a former OPEC member country but now work closely with IEA as they need energy security. It is true that the focus is now on Asian countries. We need to change the current rules of the IEA, wherein a country must belong to the OECD to join.

There is an opinion in China that global energy governance should be resolved within the G20 members. Do you think this could work?

The G20’s framework can indeed be used to solve the energy problem, but it will be in accordance with the membership structure, the problem and level of economic crisis. Therefore, it is not necessarily the best framework for talking about energy issues.

This is an edited version of an interview first published by 21st Century Business Herald