The pace of China’s oil imports growth is one of the most closely watched indicators in the industry—a gauge of the country’s huge appetite for oil and the impact it has on global oil trade and prices.
China is importing increasing volumes of oil not only because of demand growth, but also because its domestic oil production is declining as large ageing fields mature and as companies cut production from higher-cost fields amid the lower-for-longer oil prices. Thus, Chinese dependence on crude oil imports is continuously rising and is set to further grow in the foreseeable future.
Last year, China met 64.4 percent of its crude oil demand with imports, due to high production costs at home and favorable international prices resulting from the global glut. This was a 3.8-percent increase compared to 2015, and the level of dependency was set to increase further this year.
According to an overview by the U.S. Department of Commerce from July this year, China’s oil import reliance exceeded 65.6 percent in 2016 and is forecast to rise to 80 percent by 2030. By 2020, Chinese consumption of crude oil is expected at 12 million bpd. At the same time, PetroChina, Sinopec, and CNOOC have reduced production from their higher-cost fields in China because they have been unable to compete at oil prices below $50 a barrel. Consequently, domestic oil production fell by 6.9 percent to 3.98 million bpd in 2016, the lower oil prices prompting China to fill its strategic petroleum reserve by importing more, and cheaper, foreign crude oil.
This year, Chinese oil production has further dropped by 4.1 percent between January and October, Michael Lelyveld writes in an analysis in Radio Free Asia. In October alone, China’s crude oil production fell to below 3.8 million bpd.
At the same time, imports are rising and will continue to rise. This year, Chinese oil import reliance is expected to hit 69 percent. According to the International Energy Agency’s (IEA) World Energy Outlook 2017, China’s oil import dependence will rise to 80 percent by 2040, Lelyveld writes.
China is ramping up oil and gas exploration efforts and plans to develop unconventional resources in a bid to ease its reliance on oil and gas imports, the official Xinhua news agency reported on Saturday, quoting a research center at the Ministry of Land and Resources.
By 2035, China will “likely to keep the dependence rates on oil, gas imports within 70 percent and 50 percent, respectively,” according to the research center.
“The notion that they might somehow suddenly increase domestic oil production seems extremely implausible,” Mikkal Herberg, energy security research director at Seattle-based National Bureau of Asian Research, told Radio Free Asia.
“Even if they can keep it flat, they’re still headed toward 80-percent import dependence,” Herberg noted.
That’s also roughly the estimate in the BP Energy Outlook 2017, according to which China’s oil import dependence will rise to 79 percent in 2035 from 61 percent in 2015. In fossil fuels production, a 146-percent surge in gas production and 1-percent coal production growth are expected to more than offset a 13-percent decline in oil production through 2035. Related: OPEC’s Latest Agreement May Not Stabilize Oil Prices
In the World Energy Outlook 2017, the IEA estimated that Chinese net imports of oil will reach 13 million bpd in 2040.
“But stringent fuel-efficiency measures for cars and trucks, and a shift which sees one-in-four cars being electric by 2040, means that China is no longer the main driving force behind global oil use – demand growth is larger in India post-2025,” the IEA said.
“China’s choices will play a huge role in determining global trends, and could spark a faster clean energy transition,” the Paris-based agency said, noting that “When China changes, everything changes.”
In Chinese domestic oil production and its import dependence, the trend is that production is on the decline and oil import reliance in on the rise.
By Tsvetana Paraskova for Oilprice.com
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