A top Chinese oil executive predicts a 30 percent increase in oil imports this year, far higher than a government estimate only two months ago. Energy experts told RFA Beijing's attempts to cool the economy will have little impact on China's oil demand in the next year or two, which is increasingly being blamed for keeping oil prices sky-high.
"...The reality is that I don't think 30 percent growth in crude oil imports in China is sustainable over the longer term."
Petroleum Intelligence Weekly
Tian Chunrong, senior engineer at state-owned refining major Sinopec said last month that the country's oil imports could reach 120 million tons in 2004, while total oil consumption will top 300 million tons, official media reported.
Analysts told RFA that China would only be limited in its oil imports by its infrastructure, which the government is investing heavily to expand to deal with added capacity.
"If the Chinese government decides they will invest in the capacity to cope with this thing, there will be some difficult points, but it's possible to do that," Philip Andrews-Speed, a China energy expert at Scotland's University of Dundee, said.
While Beijing has sound economic, environmental and security reasons to stop the runaway growth in oil imports, he said policy-makers had so far seemed unwilling to act.
"When does the Chinese government reach the stage where they say it is not desirable for various reasons... to keep spending all this amount of money importing all this oil and building all this infrastructure, should we create a new policy for oil consumption? As yet, there is absolutely no sign of that," he said.
China's cabinet, the State Council approved a draft energy development policy on June 30 which will take China through to 2020. But while the program outlined energy conservation as the government's top priority, it did not say that the government would try to restrict the growth of oil imports.
Other analysts said demand growth was likely to slow in one year to 18 months, when the government had added sufficient power generating capacity to streamline the electricity sector.
"Those power problems are going to be solved within a year, 18 months, perhaps even two years," Sam Dale, Petroleum Intelligence Weekly's Singapore bureau chief told RFA. "After then, I would expect to see a significant slowing in China"s oil demand growth. It won't contract, but it will certainly slow."
"You'd be a brave person to bet against Chinese growth, but the reality is that I don't think 30 percent growth in crude oil imports in China is sustainable over the longer term," Dale said.
Government attempts to rein in investment in overheated sectors seems to be having little or no effect on oil import growth, Dale said, because the economic slowdown would not happen in all sectors of the economy.
"We've spent a bit of time studying the impact of that, and we've really come out with the conclusion that Beijing trying to slow its economy is not going to have a dramatic impact on baseload oil demand," he said.
But some said lagging infrastructure would slow demand because China simply did not have the capacity to deal with oil imports at current rates of growth.
Jason Feer, Singapore bureau chief for Petroleum Argus, said China was already feeling the financial strain of its imports, which are also being blamed for keeping worldwide prices high.
"All of the railroads are operating at 110-120 percent of capacity. Pipelines are all full. Terminals are in the midst of construction. Ports are being expanded. So, there's a lot of logistical problems that are arising from this, the sharp increase in demand," Feer said.
China's surging economy, which has continued to expand while the country's domestic oil production has failed to keep pace. Older oilfields like those at Daqing have started to run dry, giving Beijing no choice but to import oil.
In addition, China's power shortages have created demand for diesel generators and the fuel to run them, while skyrocketing private passenger car ownership has driven up demand for motor fuels.