China will strive to build a clean, safe, efficient and modern energy system, according to a communique released on Thursday after the fifth plenum of the 18th Communist Party of China (CPC) Central Committee that adopted proposals for economic and social development in the 13th Five-Year Plan (2016-20).

In terms of energy development in the next five years, the government will focus on capping total energy consumption, developing cleaner sources of energy and implementing reforms targeting the sector, according to a report on the website of the China Energy News on Tuesday.

As the last five-year plan before 2020, the year in which China is supposed to meet its goal of building a moderately prosperous society in all respects, the plan gained wide attention.

Coal control

China will enforce a strict limit on total coal consumption, the Xinhua News Agency reported on Wednesday, citing Li Haofeng, deputy director of the National Energy Administration's coal office.

China will promote the clean, efficient usage of coal by using some of the world's most advanced process to support industrial upgrades, Li said.

China was the world's largest energy consumer in 2014, with coal accounting for 66.03 percent of the country's primary energy consumption, according to the BP Statistical Review of World Energy 2015, which was released in June.

The goal is to make coal account for 50 percent of China's total primary energy consumption by 2050, according to China's National Coal Association in September. Both coal prices and coal producers' profits slid during 12th Five-Year Plan period (2011-15), said Li Chaolin, a Beijing-based coal researcher.

"Facing the prospect of falling coal production, the drop in oil and gas prices, and the continuous pressure from seaborne coal, coal producers will face hard times during the next five years as they struggle with high production costs," Li told the Global Times on Wednesday.

As the energy demand is expected to slow with China's economic rebalancing, its energy policy is shifting away from ensuring sufficient supply to improving efficiency and making the sector more environmentally-friendly, said Jenny Huang, associate director of corporate research with Fitch Ratings.

"Improving people's quality of life has taken priority for the nation to build a moderately prosperous society," Huang told the Global Times in an e-mail on Friday. "That means controlling consumption will remain an important part of the future energy plan for China to cap its primary energy consumption at 4.8 billion tons of coal equivalent by 2020, compared with 4.3 billion tons in 2014."

Coal consumption, in particular, will be tightly monitored in air pollution control areas to ensure it does as little damage to the environment as possible, Huang said.

New technologies such as coal extraction automation, which reduces the number of operators, and more detailed management will also play a bigger role in bringing down costs, Li noted.

Ratcheting up reforms

In addition to innovative technologies to reduce cost, experts said reforms will also play a key role in the development of the energy sector over the next five years.

"Now that the reform guidelines have been announced, the next five years will be the period to put these policies into place," Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, told the Global Times Wednesday.

China will push ahead with pricing reforms for water, fuel, gas, electricity and transportation, the Xinhua News Agency reported on October 15, citing a guidance issued by the State Council, China's cabinet.

The government aims to "basically liberalize" prices in competitive sectors by 2017, according to the Xinhua report. Policymakers will choose an "appropriate time" for liberalizing fuel prices.

Cleaner consumption

China's natural gas consumption is expected to leap. The BP Energy Outlook 2035, released in February, estimated that by 2035 China's natural gas consumption will double from its levels in 2014, when it accounted for less than 6 percent of total consumption.

China's energy structures will also undergo fundamental changes during the period as the nation's GDP growth enters a new normal of slower growth. Clean energy sources, such as nuclear, wind and solar, are expected to make up a greater proportion of China's total energy capacity, experts said.

"Significant resources will be directed at the development of clean energy, which is a fundamental solution to meeting the country's primary energy savings and emission control targets," Huang said. "Clean power capacity growth will continue to outpace total capacity growth, putting the country on track to meet the government's target of increasing the capacity share of clean power to around 40 percent in 2020 from 33 percent in 2014."

Chinese energy companies have been positioning themselves for the future. On October 22, BP and China National Petroleum Corporation inked strategic cooperation framework for shale gas exploration and production in Southwest China's Sichuan Province, as well as future fuel retailing ventures in China.

BP also announced it had agreed to sell China Huadian Corp up to 1 million tons of liquefied natural gas per year worth up to $10 billion over the next 20 years.

China National Chemical Corp (ChemChina) also partnered with Russian oil giant Rosneft to discuss setting up a unique oil refining and petrochemical cluster that could cover domestic market needs and support deliveries to high-margin markets in the Asia-Pacific region. Rosneft agreed under a framework agreement to take a 30 percent stake at one of ChemChina's oil and gas subsidiaries on June 20.

Lin said Chinese companies are more likely in the future to engage cooperation via cross-shareholdings or joint ventures to ensure sustained flow of energy sources, co-develop the market and mitigate risks.

"Chinese companies will no longer just buy assets. There will be more cooperation between Chinese and foreign energy companies," Lin said.

From China Mining