CHINA MAY OVERTAKE U.S. AS BIGGEST OIL IMPORTER

Surge driven by expansion of refinery capacity, targeted to hit 2.5m bpd by 2020

SINGAPORE/ BEIJING

CHINA is on pace to overtake the United States as the world’s biggest oil importer this year, cementing its status as Asia’s most pivotal oil market actor that will increasingly dominate the region’s fuel trade.

For the first time, China imported more crude oil in the first half of the year than the US, government statistics showed. China averaged 8.55 million barrels per day (bpd) versus 8.12 million bpd in the US, a trend that is expected to last.

The shift highlights the change in the centre of gravity in global oil markets from West to East.

Oil trader Unipec is now the world’s biggest physical oil trader.

By drawing more of the world’s oil to its shores, China will play a crucial role in setting the global price of the commodity, especially as the crude futures market in Shanghai develops.

China’s import surge is being driven by the expansion of its refinery capacity. But, as the domestic demand has not materialised to soak up the fuel supply, China’s exports of petrol and diesel have climbed to record highs.

This flood of products has caused headaches for competitors across Asia and depressed diesel profit margins to multiyear lows last year.

“China is putting a lot of pressure on the traditional export hubs of Taiwan, South Korea and Singapore to capture the market share within Southeast Asia and Australia,” said Joe Willis, senior research analyst, Asia refining, at energy consultancy Wood Mackenzie.

China plans to add at least 2.5 million bpd of refining capacity by 2020, according to a recent presentation from China Petroleum & Chemical Corp, the parent of Unipec.

This year, PetroChina Ltd will start a 260,000 bpd refinery in Yunnan in southern China while China National Offshore Oil Corp will start up a 200,000 bpd expansion at its Huizhou plant.

The startups will add 350,000 bpd of new Chinese capacity this year though both plants will not reach full capacity until next year.

Exports of petrol from China are expected to increase by at least 10,000 barrels per day this year from last year, driving overseas petrol sales to between 235,000 bpd and 240,000 bpd this year and about 330,000 bpd next year, FGE and Wood Mackenzie estimates showed.

Unipec is leading the way in targeting new overseas markets, moving jet fuel from Singapore to northwest Europe in June for the first time in several years.

Meanwhile, China diesel shipments this year have more than doubled to France, more than quadrupled to Italy and it even shipped diesel to Kenya for the first time this year. Reuters

China is putting a lot of pressure on the traditional export hubs of Taiwan, South Korea and Singapore to capture the market share within Southeast Asia and Australia.

JOE WILLIS Wood Mackenzie, senior research analyst