GENEVA (Dow Jones)--China is seeking cleaner and more efficient forms of energy as soaring oil and coal consumption poses an increasing threat to the environment and surging prices threaten to undermine economic growth.
The world's second-largest oil consumer behind the U.S. is increasingly turning to European and U.S. companies to tap renewable sources of energy such as wind and solar power, and considering incentives for foreign investment.
But natural gas and nuclear energy is likely to dominate the market for clean energy sources in China in the years to come because the alternatives are still too costly, a Chinese-European business summit in Geneva heard.
Fu Chengyu, chairman and chief executive of China National Offshore Oil Company (CEO), or CNOOC, told a panel at the summit that economic incentives such as low-interest loans and clear regulation would be needed to attract foreign investors and technological know-how to reduce China's dependence on oil and coal.
"China can't afford its current energy mix in the long term...we need to promote wind and solar energy and for this we need technological partners from Europe," Fu said during a panel discussion at the summit, sponsored by Swiss-based Horasis. "We also need to increase our natural gas imports in the years to come."
He added that CNOOC would increasingly widen its focus on oil to include other energy forms. Earlier this year the company failed in its attempt to take over U.S. competitor Unocal, faced with U.S. political resistance.
Fu said China's energy sector holds vast opportunities for European companies and there have been numerous examples of successful joint ventures in the oil industry, although he conceded that opaque government regulations are still discouraging some potential investors.
"Europeans like to stress the risk factors, but there are many mind-boggling opportunities in mainland China and in fact, no one can ignore them," said Vincent Lo, Chairman of Shui On Group.
Lo, a property tycoon in Hong Kong, pointed to the company's joint venture with French cement maker Lafarge SA (12053.FR), saying such agreements are still a good way of tapping China's lucrative markets, especially those of western and northeastern China.
"For example, the cement market is extremely divided and is crying out for consolidation," Lo said, adding it is better to join forces than miss out on such opportunities - even though European companies can't fully control their partners in China.
Though calls for the privatization of government-owned Chinese companies have increased recently, joint ventures are likely to remain key to relationships between Chinese and foreign companies in the energy sector.
"Privatizations aren't on the agenda, because the energy sector is too much of a strategic asset for the state," said Nick Butler, general vice president of Strategy and Policy Development at BP PLC (BP).
BP, which has around $4 billion in capital employed in China, is focused on ensuring that China's vast energy demands are met, and on the import and sales of oil and gas.
Butler said he expects China's energy consumption to come close to the U.S. in about 10 years' time, adding that efforts to curb pollution are on the rise.
"There is much more interest in clean energy and a great focus on our technologies," Butler said.
Though wind and solar energy technologies are increasingly attractive to China, also high on the agenda are improvements to coal refining facilities and increased use of nuclear energy, industry participants said at the summit.
As old nuclear power plants are decommissioned in Europe, China plans to invest in its own nuclear technology and is in the process of adding two new plants to its nine operating sites, panelists said.
"Though wind and solar are being discussed, I think that these technologies are still 10 to 15 years away", said Dave Roberts, executive vice president of U.K.-based BG Group PLC (BRG). The company has its eye on China but isn't active there yet.
In the meantime, Roberts said, the use of natural gas will thrive, and distribution will be key to helping China keep costs low and calm energy consumption - currently at 7 million barrels of oil a day.
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