Chinese petroleum and other liquids

May 18, 2015 12:00 AM

Chinese petroleum and other liquids

China holds 24.6 billion bbls of proved oil reserves.

China’s total petroleum and other production, the fourth largest in the world, has risen approximately 50% over the past 20 years.

Production growth has not kept pace with demand growth.

Last year China produced nearly 4.6 million bpd of petroleum and other liquids.

EIA forecasts that China’s oil production will increase slightly to higher than 4.6 million bpd by the end of 2016.

The country accounted for more than one third of global oil demand growth in 2014.

China consumed 10.7 million bpd of oil in 2014.

EIA forecasts that China’s oil consumption will continue growing through 2016 at a moderate pace to 11.3 million bpd.

It is also forecast that China’s oil consumption will exceed that of the US by 2034.

Diesel is a key driver of China’s oil products demand.

Diesel demand did decline on an absolute level in 2014 for the first time in 20 years.

Gasoline, the second largest consumed petroleum fuel is still experiencing robust demand growth.

LPG continues to experience some growth from the petrochemical industry but fuel oil demand has weakened considerably.


Sector organisation

The Chinese government’s energy policies are dominated by the country’s growing demand for oil and its reliance on oil imports.

The government launched the National Energy Administration (NEA) in 2008 to act as the key energy regulator.

China’s national oil companies (NOCs) wield a significant amount of influence in China’s oil sector.

The government launched a fuel tax and reform of the domestic product pricing mechanism in 2009 in an effort to tie retail oil product prices more closely to international crude oil markets.


Overseas activity

Since 2008, the NOCs have purchased assets in the Middle East, North America, Latin America, Africa and Asia and invested approximately US$73 billion.

By the end of 2013, Chinese NOCs had secured bilateral oil for loan deals with several countries, amounting to approximately US$150 billion.


Crude imports

Oil imports have increased dramatically over the past decade, reaching record highs in 2014.

China has made great efforts to diversify the sources of its oil imports.

Total net oil imports, driven primarily by crude oil imports, now outweigh domestic supply.

The current Five Year Plan targets oil imports reaching no more than 61% of its demand by the end of this year.

The Middle East is the largest source of China’s crude oil imports.



China has steadily expanded its oil refining capacity to meet its strong demand growth and to process a wider range of crude oil types.

The country now ranks behind only the US and the EU in the amount of refining capacity.

This year, installed crude refining capacity hit 14.2 million bpd.

Refinery utilisation rates have declined to less than 75% in the past year.

The refining sector has undergone modernisation and consolidation in recent years, shutting down dozens of teapot refineries.

Domestic price regulations for petroleum products resulted in revenue losses for Chinese refineries when international oil prices were high.

China became a net diesel fuel exporter in mid 2012.

Sinopec and CNPC/PetroChina are the two dominant players in China’s oil refining sector.


SPR and storage

The country is in the process of developing significant storage capacity to buffer geopolitical issues involving global oil supply.

The SPR involves three phases and calls for China to construct facilities that can hold 500 million bbls of crude by 2020.

At the beginning of last year, China held approximately 350 million bbls of commercial crude oil storage capacity.

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