x Abu Dhabi, UAESunday 23 July 2017

China takes oil import lead

It has been long in the coming, and now its official: China, the emerging economic superpower, has overtaken the US as largest net importer of crude oil.

An attendant pumps gas at a PetroChina gas station in Beijing. The fuel demands of China's burgeoning economy has made it the world's largest importer of crude oil. Adam Dean/Bloomberg News
An attendant pumps gas at a PetroChina gas station in Beijing. The fuel demands of China's burgeoning economy has made it the world's largest importer of crude oil. Adam Dean/Bloomberg News

It has been long in the coming, and now it is official: China, the emerging economic superpower, has overtaken the United States as the largest net importer of crude oil.

The rechanneling of global crude flows is already having a profound impact on the oil industry in the Arabian Gulf.

Provisional data provided by the US energy information administration, and picked up by the Financial Times,show that the world's biggest economy imported 5.98 million barrels per day (bpd) more than it exported in December, whereas Chinese customs data put net oil imports at 6.12 million bpd in the same month.

The data are to be treated with caution. US imports traditionally decline at the end of the year for tax reasons, and booming Latin American demand for US-refined petroleum products - which are included in oil-trading figures - has reduced net import levels. The US was still the biggest net importer for all of last year.

Nevertheless, December's figures are a bellwether. The flows of foreign oil into China will continue to swell, whereas the US will increasingly rely on its growing domestic resources.

Asia's thirst for oil has been quenched with Arabian crude for some time, and the vast majority of Gulf exports find their way to Asian markets there.

"The future of the industry is going to be based on export flows to China," said Christopher Fix, the chief executive of the Dubai Mercantile Exchange, which is trying to increase its business by becoming the benchmark for Gulf oil traded into the east of Suez market.

"It's benefiting us because we're seeing the demand coming through in trading volumes," said Mr Fix, who has seen crude trade volumes on his exchange grow by 10 per cent on the month in February.

China has not been content to play the role of the passive consumer and has sent its national oil companies to resource-rich Africa, while at the same time wooing African and Latin American governments.

The Chinese are also making an appearance in the Gulf. China National Petroleum Corporation and China National Offshore Oil Corporation are both active in the ramp-up of oil production in Iraq, and the projected Iraqi export growth is likely to feature highly in Beijing's energy security plans. The Chinese government has also been on the charm offensive in Abu Dhabi, as the outgoing premier Wen Jiabao delivered the keynote speech at the World Future Energy Summit last year.

During his visit, it was announced that both governments were working on an agreement to allow China to dig for oil in vast swathes of Abu Dhabi's landmass. Chinese oil companies will also be bidding for a part of the main onshore concession when it comes up for renewal in 2014.

Oil is not the only energy commodity that focuses Chinese attention on to the Gulf. Beijing's planners are keen to increase the share of natural gas in power generation from the current 4 per cent to a quarter of all feedstock used, a policy that could result in it drawing increasingly on Qatar's gas abundance.

"What China has done is count on gas in a substantial way," said Maarten Wetsalaar, the executive vice president for integrated gas at Shell.

China's dependence on oil from the Gulf also has the potential to put it at loggerheads with the US and the West. China has been reluctant to reduce its crude imports from Iran, a country that was subject to a fresh round of sanctions last year. The US has been pressuring Asian countries to wean themselves off Iranian oil, but China is much less likely to comply with western demands.

 

fneuhof@thenational.ae

* with additional reporting by April Yee