China will expand its oil storage capacity, the government said today, adding that /it will also pursue unconventional gas exploration to improve energy supply security, Reuters reports, citing a statement made to the national parliament, the National People's Congress.
The world's top oil importer has been stocking up on crude amid super low prices, with fill rates at its strategic and commercial reserve facilities doubling over the first quarter of the year.
What's more, shipping data from Bloomberg reported earlier this month suggested that the country may take in another 230 million barrels of cheap oil, at least over the next three months, with a fleet of 117 Very Large Crude Carriers-or VLCCs-en route to Chinese ports, which are due to arrive between mid-May and mid-August.
Separately, satellite imaging and reports from analysts cited by Bloomberg have revealed that China's crude oil inventories were beginning to decline after hitting a record in April. This has sparked optimism about demand revival in the key oil market.
"The combination of inventories falling and strong imports implies really solid refining activity," an analyst from data tracking company Ursa Space Systems told Bloomberg earlier this month. "You saw them build aggressively in late February and into the end of March, and since then they've absolutely plateaued and have come off a bit."
Yet the crisis seems to have alerted Chinese authorities to the finite nature of storage tanks and spurred them into action to expand capacity to secure reserves over the longer term.
Access to oil and gas is also a priority, according to the statement made to the NPC by the National Development and Reform Commission. The commission said it would speed up the construction of oil and gas networks and open pipelines to all eligible users, Reuters reported.
Boosting local oil and gas production is also on the NDPC's agenda. The commission said it will work on developing competitive trading for oil and gas exploration rights, eyeing a more diverse set of bidders.
By Irina Slav for Oilprice.com
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Comments
The Chinese authorities are also leaning quickly from the meltdown of WTI prices in April partly because US shale oil producers didn’t have enough storage capacity.
There is, however, another geopolitical reason and that is the escalating tension between the United States and China and the real possibility of a resumption of the trade war between them once the United States exits the lockdown.
More than 50% of China’s oil imports come from the Arab Gulf region and to reach China they have to pass through two very critical chokepoints, namely the Straits of Hormuz and Malacca both of which are patrolled by the US Navy.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London