The Belt and Road initiative (BRI) has been developed into a Chinese foreign strategy and gained a response from sixty-four nations. However none of these countries is developed country. Since BRI becomes a globalized initiative, the country boundary is not fixed and there will be more countries, included developed countries, to join in.  The major challenge for the engagement of a developed country is what could it do more in the BRI and why would it needs to be in the BRI? The geographic far away from the BRI is another challenge.  In this paper, we argue that the engagement of Australia in the BRI is a challenging but beneficial work. We innovatively introduce a third country dimension in the bilateral relationship as a justification for the engagement of Australia and demonstrate how two countries can do under the BRI.

1. Role of BRI and the energy sector 

Strengthening energy cooperation with countries along the OBOR routes, including cooperation in traditional energy such as oil and gas as well as clean energy, is one of the OBOR priorities. Another priority is the energy facilities connectivity. In order to achieve the above cooperation smoothly, China needs to speed up investment facilitation in the joint exploration, development, and construction of energy pipelines and power facilities, which however cannot be done be done by China alone.

BRI is expected to enhancing energy security for both China and other countries. Basically, energy cooperation with countries along the Belt and Road route is a mean to ensure China's energy security. However, the open-regionalism and even globalism of the BRI will make BRI go beyond China’s own interests. With investment into their energy resource development and infrastructure, the BRI countries can gain better supply of energy for themselves and other benefits such as trade and investment opportunities. 

2. Reasons for strengthening 

Australia-China energy cooperation under the BRI

Resources and energy trade and investment links are vital to the China–Australia economic relationship and could be further advanced under the OBOR framework. Resources and energy trade and investment play a key role in the China-Australia relationship (Figure 1). One reason that Australia’s economy survived the global financial crisis better than most other developed countries, is due to China’s robust economy and its unprecedented reliance on Australian resources.However, after the global financial crisis in 2008 and the development of ‘new normal’ growth model, China’s demand of energy and resources have been slow down. Looking ahead, bilateral trade and Chinese investment into Australia’s energy and mineral sector will also be moderate.

LNG is the only rising energy commodity in the future trade and investment in line with Australia’s rapid increasing export to be the world’s largest LNG exporter by 2018. However, the BRI could cause challenge to Australia LNG export to Chinas as the initiative will unlock huge gas resources in Russia and Central Asia and thus demand for Australia’s LNG may not be grow further if Australian LNG is not prioritized.

With the stagnation of energy trade and declined of energy investment, both parties need to find new momentum for energy cooperation. The BRI, in this context, could offer opportunities to strengthen energy cooperation, not only bilaterally, but also multilaterally. Further extension the BRI to Australia is ongoing, as evidenced by recent attempt to include Australia’s North Territory development plan into the initiative.  Australia thus has the chance to be part of the BRI and thus further discussion of energy cooperation, a key part of China-Australia bilateral relations are needed.

Although bilateral energy cooperation could be further enhanced beyond trade investment, multilateral  cooperation is possible and beneficial due to Australia’s strengths in market development, technical expertise and other leading experience such as public-private-partnership, which are all much needed resources for the implementation of BRI projects in third countries. Australia’s natural resource advantages, such as coal, natural gas and even renewables, could also be exported to third countries with boosted investment that is made possible by BRI. 

3. Potential Sino-AU Energy cooperation under OBOR framework 

In order to analyse the potential of Sino-Aussie cooperation in energy, we propose a framework (Table 3), which has two dimensions: a country dimension and an energy dimension. On the country dimension, we have three categories: Australia (A), China (B) and Third Countries (C); on the energy dimension, we have fossil fuels (1), low carbon fuels (2) and infrastructure (3) (which includes physical infrastructure and soft infrastructure/ institutions).  

We present potential Australia-China energy cooperation based on the framework, staring with the country dimension. 

In Australia, the potential of cooperation includes: In the fossil fuel area, the cooperation includes investment into resources and export projects of coal and natural gas; and upgrading Australia’s aged power plants with Chinese thermal coal power equipment and high efficiency technology (A1). China and Australia may also have opportunities to cooperate in improving Australia’s infrastructure in gas pipelines and power grids (A3).

Since China has mature technology and expertise in developing and applying low carbon energies such as wind power and solar power technologies and Australia has good resources, investment in to Australia (A2) is not only complementary but could also help both countries transition to a green economy.

In the Chinese market, there could also be join R&D in thermal power technology and equipment (B1) to make cleaners generation in both countries.  Australia could also invest in China’s coal and LNG projects (B3) to integrate the supply chain. Australia’s long experience in electricity market could also services (B3) for China’s nascent electricity markets.

In third countries, Australia and Chinese firms can jointly invest in coal and LNG trade facilities (C1) and infrastructure (C3) to facilitate the export of Australian resources and Chinese equipment and engineering services. China and Australia can also cooperate to export Australian solar and hydro power to Southeast Asia (C2,3).

The two countries could also cooperate in reshaping the much needed global energy governance (C3), a part of soft, or institutional infrastructure.  Both countries are members of a few important global and regional clubs, such as G20 and APEC, and thus have the capability to set issues for global debates in energy governance. 

4. Conclusion and the policy implications

Recent years with the economic growth slowing down, the traditional mode of economic relationship between China and Australia, in which the resources and energy trade and investment play a key role, faces with the risks of unsustainability. The Australian LNG export to China also faces challenges from BRI.

However, the challenges could be opportunities to engage Australian into the BRI, which could boost the traditional cooperation in trade and investment. Further cooperation in R&D and utilization of clean fossil fuels and global governance could be developed.

The China-Australian energy cooperation could also be extended to third countries by utilizing the complimentary needs of both countries.  Examples of such cooperation includes power grid and regasification terminals that can promote Australia’ s export of LNG and services as well China’s equipment and engineering services.

Chinese firms should learn to operate in Australia with good corporate responsibility and environmental governance. Chinese firm should realize that while the support from government is a must, support from local communities is equally important.  Therefore, Chinese investors should seek to create more local jobs and contribute to environmental protection, social and community stability and social welfare.

The Australia community needs to understand the real impact and opportunities of increasing activities of Chines investors. There is an urgent need to inform the Australian public on the effect of Chinese investment into Australian through debates and various forms of communication.