(EnergyAsia, January 6 2015, Tuesday) — As if China needed any encouragement, the near 50% collapse in oil prices since June has greatly aided its crude stockpiling and import programme with desperate suppliers lining up to unload their cargoes at huge discounts.

Brent, the benchmark crude that prices much of Asia’s oil imports, is trading well below US$60 a barrel and could fall further to new six-year lows to Beijing’s delight as it accelerates crude imports for stockpiling and to feed its rising refining capacity. At current prices, China’s oil import bill could fall by almost half from 2013’s US$222 billion.

Analysts expect Chinese state firms to import between 50 and 60 million barrels of crude for three new storage sites in 2015, and by up to 100 million barrels in 2016 to meet the government’s official target to stockpile 500 million barrels of crude by 2020. This does not include storage held by China’s private companies and in tankers berthed in offshore locations.

Chinese refiners are also joining the import frenzy to feed at least 4.3 million b/d of new capacity that they are expected to start up between 2012 and 2018, said the International Energy Agency (IEA). According to BP, China’s refining capacity rose from 10.3 million b/d in 2010 to 12.6 million in 2013.

With the unexpected bonus of discounted oil, China will not only complete its stockpiling programme ahead of schedule, its planners could be encouraged to raise their target as well as expand the country’s tank storage capacity.

According to the IEA, China has completed four stockpiling bases with a combined capacity of 103 million barrels under the first phase of its strategic petroleum reserve (SPR) plan. Combined, the first phase’s four terminals at Zhoushan, Zhenhai, Dalian and Huangdao currently hold more than 91 million barrels, according to the National Bureau of Statistics (NBS). Completed in 2009, the terminals were initially filled to capacity, but were tapped when oil prices spiked.

Construction of the project’s second phase along with planning of the third phase are well underway to meet the SPR’s target to hold 500 million barrels of crude in stockpile by 2020. The long-term goal is to store enough crude to cover 90 days of net imports.

Despite a widely publicised slowdown, China’s economy is still expected to grow by at least six percent a year over the next few years that will underpin the country’s rising demand for oil, gas and coal.

The world’s second largest oil consumer will use 11.34 million b/d in 2015, up by 3.3% from 2014 to follow on a 3.5% rise in 2013, said the US Energy Information Administration (EIA).

As the world’s oil supply glut worsens, China has become the most important major market for producers to lock in their supply contracts.

Tanker owners and brokers said that since mid-2014, there has been a sharp surge in vessel booking and oil traffic headed for China, pushing chartering rates to their highest levels in five years.

Amid the rising glut on the world markets due largely to the surge in North America’s production, Chinese buying alone is unlikely to stem oil’s bearish trend in 2015.

Product exports on the rise

With its economy now growing at a slower rate, China’s domestic oil consumption rose by just 2.3% in the first 11 months of 2014, according to US energy media Platts. However, its crude intake rose 9% while product imports plunged by more than 26% over the same period.

This trend will worry refiners in the region as China’s twin expansion of storage and refining capacities is paving the way for it to become a products exporter. With sales of oil products up 3.8% to 26.85 million tonnes for the first 11 months of the year, Platts expects China to become a net oil exporter in 2014.

Further aiding its cause towards greater sustainability, China expects to reduce the energy intensity of its economy in coming years as reward for energy conservation and efficiency measures being implemented.

According to the National Development and Reform Commission (NDRC), the country’s leading planning agency, China is on course to use less resources including energy to generate a unit of economic growth.

For 2014, the NDRC estimates that the Chinese economy will be using 4.7% less energy to produce one unit of GDP. The agency expects this trend to continue, enabling China, the world’s largest energy user and greenhouse gas producer, to reduce its 2015 energy intensity to 84% of the 2010 level.

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