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The government think-tank and the World Bank (WB) have recommended that China set up a cabinet ministry to oversee energy security.

The Development Research Center of the State Council and the WB made the recommendation yesterday, saying that the proposed ministry could improve energy co-ordination and supervision, and help the country meet the energy challenges ahead.

They listed China's energy challenges as soaring consumption, an impact on the environment, an inefficient decision-making process, poor efficiency and growing exposure to the global market.

"While considering reform in the energy sector, we strongly recommend that consideration be given to re-establishing a Ministry of Energy," the report, published by the two organizations yesterday, said.

The recommendation follows the central government's setting up of a vice ministry-level energy office last year, following the dismantling of the Ministry of Energy in 1993, and the establishment of the Energy Bureau in 2003.

In view of huge changes taking place in China's energy sector, the center concluded that re-establishing an energy ministry is an urgent task.

The report, which is the result of two years of research, also suggests creating a regulatory body for natural gas management.

It also calls for government agencies to be pushed to boost energy efficiency and technological innovation.

"China's energy sector needs a coordinated policy," said Xie Fuzhan, vice-president of the center at a seminar to discuss the report yesterday.

Feng Fei, department director of the center, warned that China's growing oil dependence and electricity shortage pose a risk to the nation's sustained economic growth.

According to the WB and the center, at least half and perhaps as much as two-thirds of China's oil will have to be imported by 2020.

By that time, the county's annual oil demand is expected to be between 450 and 610 million tons.

Domestic oil output is expected to peak at about 200 million tons in 2015. A similar high level of oil dependence has been reached in most industrialized countries, with imports needed to fuel growth.

But the organizations warned that the oil market is undergoing significant change and future prices are likely to be far higher than they are now.

"In a high oil price era, high dependency will make us vulnerable if we don't take measures to address the security issue," Feng said.

Meanwhile the National Development and Reform Commission said there is tremendous potential for energy conservation in China, and that the country can run almost entirely on domestically produced energy.

"China still has great potential in domestic energy supply," said Zhang Guobao, vice-minister of the commission, at an energy forum last week.

He said China has abundant coal resources and there is the possibility that big oil and gas fields have yet to be discovered. He also stressed the potential of China's hydropower, nuclear power, wind power and other new resources.

Zhang said coal gas and renewable energy sources such as biomass and solar power are expected to become "major alternatives."

(China Daily June 2, 2006)