China Power

Taiwan’s Energy Security Battle

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China Power

Taiwan’s Energy Security Battle

Taiwan is heavily dependent on imports of oil to meet its energy needs. But what happens if ties cool with Beijing?

Terms like ‘energy security’ and ‘energy independence’ are frequently bandied around these days. Yet despite governments around the world frequently lamenting the dangers of being dependent on foreign oil, the United States produces 70 percent of its own primary energy supply, while China produces around 80 percent. In Taiwan, however, the story is very different.

Last year, the island produced a record low 0.6 percent of its primary energy supply, prompting one former Defence Ministry official to comment: ‘Energy security, what energy security?’ Taiwan’s 99 percent dependence on energy imports is complicated further by dual vulnerabilities to Middle East instability and fragile cross-strait relations.

As recently as 1978, the island was able to produce 20 percent of its primary energy. So why the dramatic deterioration over the past 30 years? It's in large part because Taiwan has exhausted its small reserves of domestic petroleum, natural gas, and coal. Now, about half of Taiwan’s primary energy comes from oil, the majority of which is shipped from the Persian Gulf and Western Africa.

This shift should be of concern to Taiwan’s policymakers, especially as China upgrades its naval fleet with the goal of obtaining blue-water capabilities — Taiwan should be increasingly worried about the likelihood of continued unfettered ocean supply routes around both the Taiwan and Malacca Straits. Were China to choke off Taiwan’s oil supply, the island would only have about one month’s worth of strategic reserves to keep its economy functioning.

In addition to oil, another third of Taiwan’s energy supply comes from coal. However, over the past decade, coal imports from China have risen significantly and Taiwan now relies on the mainland for about a quarter of its total coal imports.

Against this backdrop of greater susceptibility to energy-related threats from China, there has also been increasing cross-strait energy cooperation. The mainland’s China National Offshore Oil Corporation (CNOOC) and CPC Corporation of Taiwan have been collaborating since 1994. In 2008, the two oil conglomerates agreed to joint-exploration of oil fields in the Taiwan Strait and CNOOC transferred a portion of its African oil assets to CPC. In the wake of Japan’s nuclear crisis, Taiwan and China have also bolstered engagement in nuclear safety and crisis management.

Still, although China-Taiwan energy cooperation has come at a time of warmer cross-strait relations, it remains contingent on continued strong economic ties. Under the current Ma Ying-Jeou administration, China-Taiwan economic links have reached new highs, including the signing of the landmark Economic Cooperation Framework Agreement (ECFA). However, Ma’s recent approval ratings have lurched from mediocre to just awful, and he’ll face a strong challenge during the 2012 presidential election. If the opposition is able to exploit Ma’s unpopularity, the recent momentum toward closer ties could go into reverse and the island’s energy security could be jeopardised.

With it political future so uncertain, Taiwan has moved to improve its tenuous energy situation. The Ministry of Economic Affairs published the ‘Framework of Taiwan’s Sustainable Energy Policy’ in 2008. Under the plan, one key goal is to reduce Taiwan’s energy intensity 50 percent from 2005 levels by 2025, while increasing the share of low carbon electricity generation to 55 percent. Under the Renewable Energy Development Act, meanwhile, Taiwan has targeted a doubling of its renewable energy installed capacity from eight percent to 16 percent by 2025.

Obviously, policies promoting electric vehicles, green buildings, and low-carbon cities will also gradually reduce fossil fuel dependence. But for the near future at least, Taiwan must accept that a comfortable degree of energy security is simply out of reach.

Benjamin Fox is a Taiwan-based Research Fellow on the US Fulbright Programme.