dezani_maduekeChina could become world’s top oil importer by October as the energy-hungry nation is set to overtake the United States (US) which is now positioning itself to become a net exporter of crude oil, thanks to its shale oil and gas production boom.

Next year, China’s net oil imports will exceed those of the US on an annual basis and the gap between them will continue to widen, the US Energy Information Administration (EIA) said.
Chinese demand for oil is expected to increase 13 percent to 11 million barrels per day (bpd) from 2011 to 2014. Chinese production itself will only increase 6 percent in that time, the EIA reported.

According to consultants Wood Mackenzie, the opposing trend of growing crude oil imports by China and falling imports by the US will affect inter-regional trade flows and China will need to spend $500 billion on oil imports by 2020, while US spending on oil imports will fall to $160 billion by the same year.

From 2005 to 2020, China’s oil imports will rise from 2.5 million bpd to 9.2 million bpd, while US imports will have fallen from a peak of 10.1 million bpd to 6.8 million bpd within the same period, WoodMac said, which translates to a 360 percent increase in China’s crude oil imports and a 32 percent decline for the US.

“By 2020, 70 percent of China’s oil demand will come from imports. On the other hand, US import requirements will reduce due to tight oil production,” said William Durbin, WoodMac Beijing-based president of global markets.
Given the complexity in China’s refining structure and focus on medium-sour crude, China will have to look to the Organisation of Petroleum Exporting Countries (OPEC) to produce oil products in demand because medium-sour crude is a growing share of future OPEC supply, WoodMac said.

As a result, between 2005 and 2020, OPEC’s share of Chinese imports is expected to rise from 52 percent to 66 percent, it said, adding that the share of non-OPEC imports declined from 48 percent to 34 percent to 2012, and will continue to decline to the end of the decade.

As China is becoming more dependent on Middle East and OPEC crude, analysts have stressed the need for Nigeria to avail itself of the opportunities from China, which is seen as a major alternative market for Nigeria’s crude oil following the significant drop in imports by the US.

Ngozi Okonjo-Iweala, finance minister had recently noted that the gap in demand for the nation’s sweet crude created by the US would be filled by China and India.

China’s demand for crude oil produced in Nigeria is expected to rise tenfold to 200,000 barrels per day by 2015, Nigerian officials said, reported AFP.
It would be recalled that President Goodluck Jonathan last month visited China, where five agreements to boost financial, trade, economic, technical and cultural relations between the two countries were signed, securing a $1.1 billion loan to boost infrastructure.

China’s growth in import demand can largely be attributed to its domestic oil demand growth, driven by gasoline demand due to the near-exponential increase in personal auto vehicles and diesel demand related to commercial trucking as China’s economy grows, WoodMac said.

China, which has become increasingly reliant on imported oil and polluting coal to power its economic growth, holds the world’s largest technically recoverable shale gas resource, but is not anywhere near replicating the production boom seen in the US, which has begun to reshape global energy markets.

According to the US Energy Information Administration, China has an estimated 1,275 trillion cubic feet, or 36 trillion cubic meters, of technically recoverable shale-gas reserves, more than Canada and the US combined. If extracted, unconventional reserves could help alter China’s energy profile.
The Asian nation still has obstacles to overcome, such as water shortages and lagging drilling technology.

Information from Business Day was used in this report.