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China satisfied 64.4 percent of its crude oil demand with imports last year because of high production costs at home and favorable international prices resulting from the global glut. This was a 3.8-percent increase on 2015, Chinese media reported, adding that this level of dependency will increase further this year.
Last year, China produced crude oil at an average cost of US$45-50 a barrel, while international prices were lower than that for much of the year, allowing the second-largest consumer of the fuel in the world to satisfy its domestic demand with higher imports.
In fact, China turned into a sort of battleground for the biggest exporters, including Russia and Saudi Arabia, as they fought for market share, challenged by the re-entry of Iran on international oil markets.
According to analyst Li Li from the Independent Chemical Information Service, by 2020, China’s reliance on imported oil could climb to 70 percent of demand on the back of local energy companies cutting production and spending because of the 2014 oil price crash. What’s more, some of China’s largest fields are mature, which means production costs are more likely to rise than fall.
Already output at the two largest ones, Daqing and Shengli has been substantially curbed, and there are no new discoveries made in the last few years to replace them. However, now that oil prices have recovered somewhat, production at home might inch up this year, Li said.
A projection of China’s crude oil demand for this year was actually one of the two drivers behind the latest jump in oil prices, which saw Brent crude pass the US$55-a-barrel mark to reach US$56.05 in European trading earlier today.
The projection came from CNPC, who said that 2017 will see Chinese oil demand hit a record 12 million barrels daily. This, the state-owned energy giant said, would mean that net imports would rise by 5.3 percent to 396 million tons in 2017.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.