China to beat US as world’s top crude importer in 2017

Focus article by Jean Zou

SINGAPORE (ICIS)–China is expected to become the world’s largest crude importer by 2017, beating the US, which is expected to cut its crude intake from abroad amid robust domestic oil and shale gas production, industry sources said on Monday.

Demand for crude in China, meanwhile, is expected to outpace its domestic production, necessitating higher imports.

In April, China’s daily average volume of crude imports hit a record high at 7.37m barrels, exceeding the volumes imported by the US for the first time, based on official data from the two countries.

For the whole of this year, however, US’ total crude imports at 340m tonnes or 6.82m bbl/day will remain higher than China’s 327m tonnes or 6.54m bbl/day.

But China’s net crude imports are projected to grow at an annual average of 5.9% to 434m or 8.68m bbl/day in 2020. By the end of the decade, imports will account for as much as 66% of the country’s total crude requirements, according to projections from ICIS China.

Crude consumption in the world’s second biggest economy is predicted to grow at a compound annual growth rate (CAGR) of 4% in 2015-2020, during which period the country will likely continue to build up strategic petroleum reserves and commercial crude reserves on crude security concern.

Its demand for oil products will keep rising amid a sustained economic growth, ICIS China research showed.

On the other hand, China’s crude output is expected to grow at a much slower annual pace of 0.9%, supported by higher yields from on-shore oilfields in northwest China and off-shore oilfields.

Major oilfields, such as Daqing and Shengli oilfields, face declining exploitable resources and increasing difficulty in crude exploitation.

In contrast, the US’ crude imports will slow down in 2015-2020, while domestic output is projected to rise at a CAGR of 2.6%, against a 0.5% growth in demand, according to the US’ Energy Information Administration (EIA).

US’ annual crude imports are expected to hit a low of 300m tonnes (6.05m bbl/day) in 2019 before picking up to 307m tonnes (6.14m bbl/day) in 2020.

With China becoming a major influence in the global crude market, major oil producers are shifting their focus to the East from the West.

“Everyone’s eyes are glued to China’s economic data and its crude demand,” said an analyst from Unipec, China’s top crude importer.

The Chinese economy has been continuously weakening over the past four years, with GDP growth in 2015 projected at 7% – the slowest in 25 years.

Its crude consumption will slow down but will remain higher compared with those of other major economies, industry sources said.

Major crude exporters are seeking opportunities to cooperate with China, including Russia, the Middle East and South America.

Meanwhile, China has been also strengthening partnership with oil producing countries to guarantee security in its crude supply.

China National Petroleum Corp (CNPC) and Russia’s state-owned oil company Rosneft reached an agreement in late 2013 to increase supply of Russian crude to China.

A 13m tonne/year refinery, co-invested by Saudi Aramco, PetroChina and Yuntianhua United Commerce, is scheduled to come on stream at Kunming in Yunnan province in the first half of 2016.

China has also signed loan-for-oil agreements with several oil production countries in South America.

In 2014, the country has become the largest oil export destination of oil cartel OPEC. It has a 40% share of Iran’s crude shipments and a 49% share of Angola’s crude exports, according to official data.

Among non-OPEC countries, Oman supplied 60% of its crude exports to China last year. Russia has been increasing its crude exports to China in the face of sluggish European economy and western sanctions.

China comes in second to the Netherlands in terms of consumption of Russian crude, and will likely become the largest crude exporting market for Russia eventually, industry sources said.

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