China be­comes world’s largest oil im­porter

world’s largest oil im­porter

Mizzima Business Weekly - - CONTENTS - Chu Daye

With China hav­ing over­taken the US to be­come the world's largest oil im­porter in 2017, ex­perts fore­cast a mar­ginal in­crease in 2018 with a cycli­cal peak pos­si­ble in 2020 or shortly there­after.

China sur­passed the US, the for­mer No.1 crude im­porter, in an­nual gross crude oil im­ports in 2017, im­port­ing 8.4 mil­lion bar­rels per day (bpd) com­pared with 7.9 mil­lion bpd for the US, ac­cord­ing to a re­port by the US En­ergy In­for­ma­tion Ad­min­is­tra­tion (EIA) pub­lished in early Fe­bru­ary.

The EIA said that the in­crease in im­ports was mainly due to added re­fin­ery ca­pac­ity and strate­gic stock­pil­ing, cou­pled with shrink­ing do­mes­tic oil pro­duc­tion.

Given the ex­pected de­cline in China's crude oil out­put, the EIA re­port fore­cast China's crude im­ports will likely con­tinue to rise over at least the next two years. Jin Lei, an as­so­ciate pro­fes­sor at the China Univer­sity of Petroleum, said last year's 10 per­cent in­crease was the re­sult of rel­a­tively sta­ble global crude prices. Cus­toms data showed that 2017 crude oil im­ports stood at 420 mil­lion tons.

"With global crude prices likely to move up to about $60 per bar­rel, the rise in China's crude im­ports will be held to less than 10 per­cent but the over­all trend of grow­ing will not change this year," Jin told the Global Times on Tues­day. As to when China's crude im­ports will peak, Jin said "soon."

"Prob­a­bly [a peak will ap­pear] at some­time af­ter 2020, due to the pos­si­ble mass use of new-en­ergy cars and hy­brids, ris­ing con­sump­tion of nat­u­ral gas and ex­panded use of other al­ter­na­tive en­ergy sources such as re­new­ables," Jin said.

Jin said it is dif­fi­cult to pre­dict at this time whether China's crude oil im­ports will re­main at a plateau af­ter 2020 or in­crease again.

"In the long run, if al­ter­na­tive sources don't ma­te­ri­al­ize as pre­dicted, and de­mand con­tin­ues to rise, crude im­ports will keep grow­ing," Jin said.

How­ever, Chen Ruibi, chief en­ergy an­a­lyst at Shang­hai-based Hi­cend Fu­tures Co, said that there is "no way" China's oil im­ports will peak in the short or medium term.

"De­spite some suc­cesses, China's eco­nomic re­struc­tur­ing could not be done overnight. The near-term needs of de­vel­op­ment mean that China can't es­cape its re­liance on tra­di­tional en­ergy sources, of which crude oil plays a ma­jor role," Chen told the Global Times.

Con­sid­er­ing the lim­ited num­ber of do­mes­tic oil fields that are both eco­nom­i­cally and tech­no­log­i­cally re­cov­er­able, China can't do much about its heavy re­liance on im­ported crude, Chen said. Chi­nese oil gi­ants have weighed in on the is­sue in re­cent days.

The China Petroleum and Chem­i­cal In­dus­try Fed­er­a­tion, an in­dus­try body, said that China's ap­par­ent de­mand (do­mes­tic pro­duc­tion plus net im­ports) could rise 5 per­cent to 630 mil­lion tons in 2018, ac­cord­ing to me­dia re­ports.

The fed­er­a­tion is­sued fore­casts for sev­eral bench­mark types of crude this year. For US West Texas In­ter­me­di­ate, the price will av­er­age $55 per bar­rel; for in­ter­na­tional bench­mark Brent, it will be $60 per bar­rel and for Daqing (a ma­jor crude pro­duc­tion base in North­east China) crude, the av­er­age will be $53 per bar­rel.

China's ap­par­ent crude de­mand will reach 615 mil­lion tons in 2018, ris­ing 4.6 per­cent year-on-year, in­dus­try news site re­ported on Jan­uary 17, cit­ing a re­port by a re­search in­sti­tute af­fil­i­ated with the State-owned gi­ant China Na­tional Petroleum Corp.

China's re­liance on im­ported crude in 2017 rep­re­sented 67.4 per­cent of its de­mand, the re­port said. It also said the net im­port crude vol­ume will be 423 mil­lion tons in 2018, up 6.7 per­cent from 2017.

As for re­fined prod­ucts, de­mand may rise 3 per­cent in 2018, ac­cord­ing to a re­port is­sued by oil and gas gi­ant Sinopec Corp on Thurs­day.

With a de­cline in im­ports from the Mid­dle East, the US and Brazil will grow into im­por­tant sources of crude im­ports for China, while Rus­sia is set to re­main the largest source, said the Sinopec re­port. Jin said China will have in­creas­ingly di­ver­si­fied en­ergy sources.

"In ad­di­tion to the de­cline in the pro­por­tion of OPEC crude, shale oil from the US and Chi­nese ex­plo­ration re­sults in the Arc­tic Ocean could sup­ple­ment China's en­ergy re­sources," Jin said, not­ing that oil from Cen­tral Asia, Latin Amer­ica and Africa will be al­ter­na­tives to OPEC oil.

"In terms of en­ergy se­cu­rity, the pipe­lines [Cen­tral Asia, Rus­sia and Myan­mar] are among the first to be se­cured. Ports in Pak­istan could be used to trans­port oil over­land to cir­cum­vent sen­si­tive ar­eas," noted Jin.

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