(EnergyAsia, August 21 2013, Wednesday) — China’s annual crude oil import bill will reach a record US$500 billion by 2020, far greater than any incurred by any country in history, predicts consultant Wood Mackenzie.
The UK-based firm arrived at this sum based on its forecast for China to import 9.2 million b/d of crude oil at an average price of US$149 per barrel. In 2005, China paid just US$50 billion to import 2.5 million b/d based on Brent crude averaging US$55 per barrel.
In contrast, the world’s second largest oil importer, the US, will see its purchase bill slide from US$335 billion in 2005 to US$160 billion by the end of this decade.
The trends highlight the growth of the Chinese oil market and its growing reliance on imports in complete contrast to the US which will experience further weakening in oil demand and rising domestic production. US imports will have fallen from a peak of 10.1 million b/d to 6.8 million b/d over the 2005-to-2020 period, said Wood Mackenzie.
The opposing trends for a 360% increase in China’s crude oil imports and a 32% decline for the US will impact energy cost for both countries and inter-regional trade flows.
Wood Mackenzie has pinpointed 2017 as the turning point for Chinese crude oil imports to surpass the US.
William Durbin, the company’s Beijing-based President of Global Markets, said:
“By 2020, 70% of China’s oil demand will come from imports. On the other hand, US import requirements will reduce due to tight oil production. It is important to note these opposing trends as it means the US is becoming more North America-centric for its supply needs and China more dependent on Middle East and OPEC crude.
“We will therefore see OPEC suppliers, who traditionally focused on the US for crude sales, compelled to shift their focus towards China.”
Between 2005 and 2020, OPEC’s share of Chinese oil imports is expected to rise from 52% to 66%, while its share of the US market will fall to 33%.
Rising gasoline and diesel demand related to private vehicle and commercial trucking have been driving China’s oil imports, said Harold York, Wood Mackenzie’s Principal Oils Markets Analyst.
“Although lesser per capita by international benchmarks, by 2020 China will be second only to the US for the total fleet of personal auto vehicles in use. From 2005 to 2020, China will see the number of vehicles rise from 20 million to 160 million,” he said.
“China’s refining structure is currently among the most complex in Asia, focused on medium-sour crude. To produce the oil products in demand, China will therefore look towards OPEC because medium-sour crude is a growing share of future OPEC supply.
“The high cost to China for crude oil imports is compounded by the fact that China will pay a higher price for the imports relative to the US as the average price is based on a differential to Brent.
“China’s import crude price tends to be closer to Brent than the US because of growing North America supply options. Also, the quality of the Chinese import barrels of medium crude is rising relative to the US. North American production from tight oil plays is skewed towards light sweet crudes, leaving heavy-sour crudes a growing share of its imports, thus providing North American buyers greater discounts for imports.”