Rising Chinese Oil Imports Bodes Well for Chinese Oil Companies

There's no sign of any slowdown in Chinese oil imports yet, as the nation's economy expanded 10.9% in the first half of the year and 11.3% in the second quarter -- the fastest pace in more than a decade.

Shippments of crude oil and related products from overseas suppliers rose 20% year over year in the first quarter. The figure below displays the oil imports from overseas during the recent quarters (click to enlarge).

Follwoing the high growth rates in 2003 and 2004, imports decreased marginally in 2005. However, the growth rates seemed to rise again, as the first quarter showed a strong increase in oil imports.

Cnooc Ltd. Chairman Fu Chengyu said in a July 18 interview, that shipments will stay near 130 million metric tons a year but will decline. He also said that

The policies on energy saving will take three to five years to implement. I feel confident that energy imports won't be as much as we thought before.

That prediction contrasts with the statement of Barry Cheung, chief executive of Titan Petrochemicals, the country´s larget oil-supertanker owner, on April 12th in Hong Kong:

We expect China to import 10-15 % more crude this year. We believe 2006 will be a better year than 2005.

China's energy consumption is 8.4 metric tons of oil equivalent per $10,000 of gross domestic product, 3.4 times the global average, 8 times that of Japan and 4 times the figure in the U.S., Donovan Huang, senior analyst at credit-rating agency S&P's, said. The figure below documents that the oil-sensitifity of the Chinese economy has risen in the past years.

China aims to cut the amount of energy used to produce each unit of GDP by 20 percent in five years, and 4 percent this year, Premier Wen Jiabao said in March. The government is seeking to reduce the nation's reliance on oil imports by promoting power sources such as nuclear, solar and hydro-power. China´s National Development and reform Comission [NDRC] and the National Bureau of Statistics [NBS] recently announced that Chinese oil demand fell slightly (0.3-0.5%) in 2005. Which is in contrast to an increase of 2.5% reported by the International Energy Agency [IEA]. However, it should be noted that this difference may be attributed to different methods of tallying apparent demand, as the official numbers are influenced by changes in inventories, which are currently not published.

The IEA forecasts that China may increase oil consumption by 5.5 percent in 2007, after a 6.1 percent increase this year, because of strong economic growth. Given China´s currently strong economic growth and the possibility that its inventories have declined [pdf file], the recent surge in oil imports suggests that oil imports will rise at least throughout the rest of this year, as China begins to fill its strategic government storage.