Letter to the Editor
China's appetite will affect oil market
January 27, 2006
China's appetite for world oil is critical. It has been importing crude oil since 1993 and is now the second-largest oil consumer after the US, having surpassed Japan.
At present, China fulfils its annual crude oil demand of 2.13 billion barrels, or 300 million tons, by importing 852 million barrels. In other words, 40 percent of the oil now consumed by the mainland is imported.
According to a recent report from the International Energy Agency, China will become the world's largest oil importer by 2020.
As Bert Chanetsa writes (January 23), China is determined to secure alternative sources of supply. It is widely known that China's oil companies are actively exploring the globe for new sources of energy to fuel the country's fast-growing economy, especially as reserves of its largest oilfield, Daqing in Heilongjiang (erstwhile Manchuria), which has been in operation since 1959, are in decline.
Since 2003 China has been using diplomatic influence to gain access to oilfields worldwide. Recent high-profile cases of China's hunt for oil are the unsuccessful bid by the China National Offshore Oil Corporation (Cnooc) for Unocal, China National Petroleum Corporation's acquisition of Canada-registered PetroKazakhstan for $4.18 billion (R25 billion), and Cnooc's $2.27 billion offer to buy a Nigerian oil field stake.
This shows that China is not only a major buyer of crude oil, but also a strong influence on pricing. China's thirst for oil will increase in the future. According to Xinhua, Beijing's official news agency, to maintain an economic growth rate of 7 percent a year over the next decade, China's oil imports must escalate at 4 percent a year.
China's annual demand for oil is likely to reach 2.485 billion barrels by 2010 and 3.195 billion barrels by 2020. Dependence on imported oil is likely to increase from 50 percent of demand in 2010 to 60 percent in 2020.
In 2003 Beijing ratified the implementation of a strategic reserve of imported crude oil, totalling 355 million barrels, which would meet China's demand for 90 days during an emergency, the China Energy Net said. The $12 billion construction of additional storage capacity is scheduled for completion by 2018 and includes more than four major coastal and inland depots.
China's development needs energy. It is not a question of when but how China will influence the oil market in the future.
Ying Chang, Melrose
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