CHINA MAY OVER­TAKE U.S. AS BIG­GEST OIL IM­PORTER

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

New Straits Times - - Business -

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

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