Thread Content
Review of China’s oil and gas industry in 2008 and outlook for 2009 Source: China Petroleum News 2009-02-10 In 2008, international oil prices fluctuated sharply; a drop of 100 dollars caused difficulties for the oil and gas industry, and it also contributed to the ongoing economic decline around the world amid these volatile oil price conditions. The global oil and gas industry is facing challenges, but does that mean the entire industry is heading into decline? On February 4, reporters learned from the National Energy Work Conference that China’s oil and gas industry managed to achieve steady development in 2008, despite the global economic downturn ； Looking ahead, China’s oil and gas industry is set to shake off the economic downturn in 2009 and maintain its trend of sustained growth. Oil consumption is growing rapidly, and oil import and export trade is active. Looking at the overall trend in crude oil production since 2008, factors such as losses in domestic crude oil processing and tax rebates for imported oil used in processing had an impact on domestic crude oil production, especially in the second quarter. Crude oil production increased by 1.7% on a year-on-year basis in the first half of the year, while it only increased by 0.8% in the second quarter. In the second half of the year, domestic crude oil processing profits increased, and the growth rate of crude oil production picked up. In 2008, crude oil production was 189 million tons, an increase of 1.07% on a year-on-year basis. In 2008, domestic oil demand continued to grow at a rapid pace, but market demand varied significantly across different quarters of the year. In 2008, China’s apparent oil consumption reached 389.65 million tons, an increase of 23.95 million tons compared to 2007, representing a growth rate of 6.5%; this increase was 1.7 percentage points higher than that in 2007. The external dependence on oil is 51.3%, up by 0.8% from 50.5% in 2007. Affected by various factors such as the global financial crisis, fluctuations in international oil prices, severe natural disasters, and domestic macro-control policies, the domestic oil market experienced significant fluctuations in 2008, showing the following characteristics: First, oil demand was highly uneven throughout the year; there was a shortage of oil products in the first half of the year, while the market weakened in the second half. On a quarterly basis, oil demand was highest in the second quarter, with apparent oil consumption reaching 100.44 million tons, after which it declined quarter by quarter. Second, the supply of refined oil continues to grow at a relatively fast pace, but the growth rate is declining, with uneven growth between coastal areas and inland regions. Third, oil imports continued to grow at a rapid pace, with the degree of external dependence exceeding 50%. According to statistics from the General Administration of Customs, in 2008 China imported a total of 218.53 million tons of oil (including fuel oil), an increase of 21.56 million tons compared to 2007, representing a growth rate of 10.9%. Of this, the total annual import of crude oil amounted to 178.88 million tons, an increase of 15.71 million tons compared to the previous year, representing a growth rate of 9.6%. During the same period, a total of 18.68 million tons of oil were exported. After accounting for imports and exports, the net oil import for the whole year was 199.85 million tons, an increase of 22.28 million tons compared to the previous year, representing a growth rate of 12.55%. In 2008, the average annual price of crude oil imports in our country was $723.03 per ton, up by $234.1 from $488.9 in 2007, representing a increase of 47.9%. The average export price of crude oil was $716 per ton, up by $282.3 compared to 2007, representing a increase of 65.1%. The average import price of refined oil was $358.98 per ton, down by $127.3 from $486.3 in 2007, representing a decline of 26.2%. The average export price of refined oil was $802 per ton, up by $212.1 from $589.9 in 2007, representing a increase of 36%. In 2008, 50% of China’s crude oil imports came from the Middle East, amounting to 89.7 million tons, a increase of 16.96 million tons compared to the previous year, representing a growth rate of 23.3% ； Next is the African region, with import volumes of 53.95 million tons (accounting for 30%), an increase of 900,000 tons or 1.7% ； Imports from Europe and the Western Hemisphere amounted to 30.25 million tons (16.9%), a decrease of 1.38 million tons, or 4.4% ； Imports in the Asia-Pacific region amounted to 4.98 million tons (2.8%), a decrease of 0.76 million tons, representing a 13% drop. Among imports of **, the top five countries in terms of import volume are Saudi Arabia (36.37 million tons), Angola (29.89 million tons), Iran (21.32 million tons), Oman (14.58 million tons), and Russia (11.64 million tons). Natural gas production and consumption are growing rapidly, offering broad market prospects. In recent years, natural gas consumption in our country has increased significantly. From 2000 to 2008, natural gas consumption grew at a rapid pace; the national consumption of natural gas was 24.5 billion cubic meters in 2000 and rose to 72 billion cubic meters in 2008, with an average annual growth rate of 14.4%. As natural gas infrastructure continues to improve, the natural gas consumption market has rapidly expanded from areas surrounding oil and gas fields to more economically developed regions. Guided by **natural gas utilization policies, the consumption structure is also continuously being optimized. Before 2000, due to limitations in transportation pipelines, China’s natural gas consumption market was confined to areas surrounding oil and gas fields, with natural gas being primarily used as an industrial fuel and in the chemical industry. In 2000, industrial fuel and chemical gas accounted for 78.3% of the total national natural gas consumption, city gas accounted for 17.6%, and gas-powered electricity generation accounted for 4.1%. With the completion and operation of long-distance pipelines such as West-to-East Gas Pipeline, Shaanxi-Beijing Line 2, Zhongwu Line, and Senuilan Line, the areas that use gas have rapidly shifted toward the economically developed coastal regions. As a result, the consumption pattern has changed: demand for gas in urban areas for cooking and power generation has increased significantly, while demand for gas as an industrial fuel and chemical raw material has gradually decreased. Looking ahead to the future of the oil and gas industry, challenges and opportunities coexist. In 2009, the international financial crisis will continue to spread, world economic growth will keep slowing down, international crude oil prices are likely to fluctuate at low levels, and the growth rate of domestic crude oil demand will also slow down. This presents both challenges and opportunities for China’s oil and gas industry. According to the projections of authoritative domestic and international institutions and economists regarding the future trend of China’s economy, the economic growth rate is likely to continue to decline in the first and second quarters of 2009; there may be a recovery in the third quarter, with growth accelerating in the fourth quarter. The overall economic growth rate for the year is expected to reach 8%. Therefore, China’s oil demand is expected to continue growing in 2009, but at a significantly slower pace. From the perspective of the international oil market, it is difficult for the global economy to emerge from its current downturn in the short term. Major international institutions and experts generally believe that international oil demand and prices will continue to be affected by the weak economic conditions in 2009, with average international oil prices expected to remain below those of 2008 throughout the year. However, since international oil prices have now dropped below $40 per barrel, the momentum for further sharp declines has weakened. In the face of the new circumstances, the **Energy Bureau proposed that the overall approach for oil and gas operations in 2009 should be as follows: to earnestly study and apply the Scientific Outlook on Development, continue to break free from traditional thinking patterns, adhere to reform and opening up, take into account both domestic and international situations, strengthen strategic thinking and institutional innovation, seize opportunities and meet challenges, ensure continued stable growth in domestic oil production and rapid increase in natural gas production, further improve the strategic layout for oil and gas supply, establish a sound emergency safety system, and promote the scientific development of the oil and gas industry. To this end, the **Energy Bureau requires that efforts be continued in oil and gas planning, that policy research and regulatory development be strengthened, that institutional innovation and technological progress be promoted, that efforts to explore for resources be intensified, that stability in the eastern regions be maintained, that development in the western regions be accelerated, and that domestic crude oil production remain stable while increasing, with natural gas production growing at a rapid pace. We will continue to rely on the natural gas industry as a key tool for transforming our country’s development model, promoting the optimization and upgrading of the industrial structure, and building an environment-friendly society. We will keep improving the natural gas distribution networks and mechanisms for storing gas to manage demand fluctuations, and actively advance liquefied natural gas projects. Continue to plan and build a number of key oil and gas pipelines, promote international cooperation in oil and gas, improve the reserve system, and strive to establish a safe, stable, economical, and reliable oil and gas supply system. (Ren Jikai)