(EnergyAsia, February 3 2015, Tuesday) — China’s economy is slowing down, but that’s more than offset by the benefits from the sharp decline in oil and gas prices since mid-2014, said analysts.

The 55% plunge in oil prices since mid-2014 has helped the country save around US$100 billion in import costs, Lin Boqiang Lin, the dean of the China Institute for Energy Policy Studies, told the World Economic Forum in Davos, Switzerland last month. China depends on imports to meet nearly 60% of its domestic oil consumption which is expected to reach 10.75 million b/d this year, according to OPEC.

The world’s largest energy consuming country imported more than 6.2 million b/d of crude oil and 59 billion cubic metres of natural gas last year, according to CNPC’s Economics & Technology Research Institute.

Since regulated fuel costs are adjusted according to global prices, the World Bank said it expects China’s CPI inflation to decline over several quarters. But the overall effect would be small given that the weight of energy and transportation in the consumption basket is less than one-fifth.

The fiscal impact is also expected to be limited since fuel subsidies are only 0.1 percent of GDP. Despite significant domestic oil production and the heavy use of coal, China remains the world’s second-largest oil importer.

The bank predicts China’s current account surplus will widen by 0.4 to 0.7 percentage points of GDP if oil prices remain at near current level throughout 2015.

Despite the lure of cheaper assets from the oil price collapse, the country’s three main state-owned oil and gas firms have become far less acquisitive as they are now more focused on improving profitability, said CNPC’s research institute.

It found that CNPC, CNOOC and Sinopec spent a total of less than US$3 billion in foreign acquisitions last year compared with US$22.2 billion in 2013.

In 2012, the Big Three invested a record US$34 billion abroad, triggering criticisms in Beijing that led to police investigations and the arrest of several senior executives and powerful politicians on corruption, bribery and fraud charges.

Analysts said the Chinese firms overpaid for many of the assets, and are unlikely to make a profit on the acquisitions.

 

 

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