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According to a recent orientation report on China's oil and gas industry for the year 2018-2019, the country's apparent oil consumption reached 648 million tons in 2018, up from 6.95% over the previous year, while China's net imports of crude oil rose 10.9% -on-year to 460 million tons. The report also said China's dependence on imported crude oil was close to 70 percent last year.
Needless to say, the dependency ratio is quite high, but in my opinion it can still be a conservative calculation. With different sets of statistical indicators, China's dependence on oil imports is expected to have already surpbaded 70 percent. More importantly, the government should be aware that such high oil dependency is actually a very dangerous source of risk.
Even more worrying is that Japan and the United States would hold at least 140 days and 100 days of oil stocks, based on their net import volumes, while the strategic oil reserve ( China's current RSP) is only about 40%. 50 days of coverage of the country's net imports. An internationally accepted practice regarding PHI is that a country must have at least 90 days of net import coverage to ensure the security of its energy supply, in order to be able to maintain its normal industrial activities. while relying on national oil storage in case of unforeseen circumstances. In other words, China's heavy reliance on imported crude oil would make it difficult to manage extreme conditions such as wars and natural disasters.
In addition, the current heavy reliance on imported crude oil in China is not expected to see much change in the near term, mainly due to the following factors.
First, China's oil fields have generally reached the limits of their oil production capacity, and it is difficult to predict an additional margin of progress. China's crude oil production has also declined in recent years. According to the master plan report, the country's crude oil production fell for the third year in a row to 189 million tonnes in 2018. Two main factors explain this downward trend. First, some large national oil fields, such as Daqing, are about to run out. Second, some oil deposits may still have oil reserves, but given low oil prices and rising production costs, it is much cheaper to import crude oil than to produce it.
That being said, China may be able to maintain its oil production around 180 million tonnes, but it is fundamentally impossible to significantly increase production. The statistics also showed that China's proven oil reserves could support the current level of production for about 10 years. Of course, there may be new discoveries over time, but domestic oil production is not expected to increase sharply, even with some new reserve discoveries.
On the demand side, demand for oil consumption continues to grow in China. In particular, the demand for driving increases exponentially. As a developing country, China will experience continued economic growth and its number of cars per capita will undoubtedly continue to increase. According to the Ministry of Commerce, while the growth rate of auto sales fell by 2.8 percentage points in 2018, auto sales in China still amounted to more than 28 million, ranking first in the world. world. With an increase of 28 million vehicles on the roads each year, it is not surprising that oil consumption is increasing in the foreseeable future.
Growing energy demand and declining domestic oil production have led to heavy reliance on imported crude oil.
From the point of view of energy security, it is indeed very dangerous, which is why the government has made every effort to promote electric vehicles and hydrogen fuel in recent years. Despite all these efforts, the development of electric vehicles and other new energy vehicles still can not keep up with the growth in demand for oil consumption.
However, it should be noted that the likelihood of extreme situations is rare, but that does not mean that we can not take any precautions. We can always do something to prevent the worst case scenario.
For example, while China is constantly accumulating its SPR stocks, it rarely discloses its commercial or strategic oil reserve data. It is therefore difficult to estimate the rate of its accumulation. According to official reports, China plans to have domestic oil reserves of some 500 million barrels by 2020. In 2014, China made its first announcement about the RPS, which then rose to 12.43 million tonnes. The figure climbed to 26.1 million tons in 2015. It is estimated today that Chinese oil bases store about 40 to 50 days of oil use, and it is essential that the country continues to store its resources to achieve the goal of 90 days of import cover in the future.
Another important aspect is public transit. Great efforts are needed to vigorously develop convenient rail transportation and increase the cost of driving in order to encourage environmentally friendly travel options.
Source: Global Times
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