China Oil Imports to Double in 5 Years on Rising Demand, WTO
By Edmond Lococo
Beijing, April 14, 07:21 (Bloomberg) -- China's crude oil imports
will more than double in the next five years as demand for oil
products rise and entry into the World Trade Organization removes
barriers to imports, analysts said.
China's crude oil demand will grow about four percent a year
over the next five years, rising to about 235 million metric tons
by the year 2005, said Yang Bo, an engineer at China Petrochemical
Consulting Group, a subsidiary of Sinopec, the country's largest
refiner.
As domestic crude oil output will remain unchanged at about
160 million tons during the period, imports will have to rise to
at least 70 million metric tons by 2005 from about 30 million tons
a year now, he said.
``China's crude oil demand will see a steady rate of
increase, while the outlook for production growth is not very
optimistic,' Yang said. ``China's rising oil demand will mainly
be met through crude imports rather than through imports of oil
products due to the country's surplus refining capacity.'
China had 270 million tons of refining capacity in 1999,
although only 176 million tons of crude were processed, meaning
only 65 percent of capacity was utilized, he said.
WTO Impact
China's expected entry into the World Trade Organization
later this year will also increase imports of oil products, which
are currently restricted, although this would take place more
slowly, he said.
China now controls products through a quota system to protect
domestic refiners.
If China joins the WTO this year, quotas will be increased by
15 percent annually and import restrictions will be abolished by
2004., Chen Huaidong, an engineer at Sinopec Economical
Institution, told an oil conference in Beijing Thursday.
Before China joins the Geneva-based global trade
organization, it must first complete trade talks with the European
Union.
A third round of talks broke down in Beijing three weeks ago
as China refused to give in to European demands for majority
ownership of Chinese phone and insurance ventures, lower tariffs
on cars and the abolition of state monopolies.
Still, a European delegation is expected to make another trip
to Beijing in the next few weeks to try and reach an agreement. If
the two sides can come to an agreement, then foreign oil companies
will also be allowed to establish wholly owned gasoline stations,
a practice forbidden now, Chen said.
Within five years of joining the WTO, China will open its
wholesale oil market to overseas companies, although foreign
investments will not be allowed in product depots or storage
facilities, he said.
In addition, China has also committed to lower tariffs on
major oil products, according to the publication China Oil, Gas
and Petroleum, or OGP.
Tariffs on gasoline will be cut to five percent from nine
percent, while Kerosene will fall to six percent from nine
percent, according to OGP.
Heavy fuel oil tariffs will be cut in half to six percent,
although diesel tariffs will remain unchanged at six percent,
according to OGP.
Lower Margins
As the volume of oil product imports picks up, domestic
prices, which are higher than international levels, will begin to
track the international market more closely, said Yang of China
Petrochemical Consulting.
That will mean declining profit margins on production and
sale of oil products in China, he said.
``China's oil products market will become fiercely
competitive after WTO entry,' Yang said.
China is expected to make emission standards for automobiles
more strict in coming years, which will create a need for better
quality oil products, he said.
``For foreign oil companies in China after the WTO, a key
opportunity will be to provide high-quality products, especially
those that can help protect the environment,' Yang said. |
