Diversification as an energy importing strategy for China under the Belt and Road Initiative

Abstract

One of the key aims of 'the Belt and Road (B&R) Initiative' is national energy security for China. This paper investigates how the B&R Initiative can improve China's energy security through diversification of the energy mix, energy suppliers, transport routes and settlement currency. With those indicators, we quantify the enhancement of energy security after China adopted a diversification strategy under the B&R Initiative. To support the study, we also use financial portfolio theory as a management tool to increase the national energy security. The results of the study show that after China adopted the diversification strategy, the national energy security level increased. The major findings of this study are, first, China will be able to import more natural gas and oil from different countries along the B&R. Second, the number of energy suppliers will be increased by adding several countries along the B&R in Central Asia and Africa, thereby reducing the heavy reliance on the Middle East. Last, new pipeline transportation will diversify transport modes and reduce China's heavy dependence on the Malacca Strait, which was and is still by far the major oil and liquefied natural gas (LNG) transport route.