China to Increase Crude Oil Imports in Term Contracts
China, the world’s second-biggest energy consumer, plans to increase crude oil imports through long-term contracts and cut spot purchases to cushion against price and supply fluctuations.
“We need to gradually change the status of an over- weighted proportion of spot trading in crude oil imports,” the information office of the State Council, China’s cabinet, said in a report released yesterday. “The government will encourage the signing of long-term supply contracts with foreign companies and diversify the channels of trade.”
China will rely on imported crude for more than half of its supplies by 2010 as economic growth drives increased demand, the nation’s biggest oil refiner China Petroleum & Chemical Corp. said last month. The country paid 41 percent more for crude oil imports in the first 11 months of the year as crude prices rose to records. Imports rose 0.5 percent by volume.
“It’s almost impossible to have a fixed price for long- term crude oil supplies,” Grace Liu, an oil analyst with Guotai Junan Securities Hong Kong Ltd., said by phone today. “The report may imply the government’s intention to lock in stable oil sellers to ensure long-term supplies.”
Crude oil, heading for its biggest annual gain in five years, traded above $94 a barrel in New York today on speculation that a U.S. Energy Department report will show inventories in the world’s largest energy user fell for a sixth week. Prices have risen 54 percent this year.
“The government aims to reduce risks through its plan to increase the term-contract volume, given the volatile global oil market,” Yin Xiaodong, a senior oil analyst with Beijing- based Citic Securities Co., said.
Energy Security
China is not a threat to the world’s energy security and energy issues should not be politicized, the report said. The country urges that conflicts in oil-producing regions be resolved through dialogue instead of military force, according to the report.
“The international community should work collaboratively to maintain stability in the oil-producing and exporting countries, especially those in the Middle East, to ensure the security of international energy transport routes and avoid geopolitical conflicts that affect the world’s energy supply,” it said.
The Chinese government encourages its companies to participate in the construction of “energy infrastructure facilities” abroad, the information office said in a report named China’s Energy Conditions and Policies.
The country will accelerate the drilling of oil and natural gas resources to meet rising demand, it said.
Songliao, Tarim
“We will focus on the Bohai Bay and the basins of Songliao, Tarim and Ordos and actively explore new regions to increase the recoverable reserves,” the energy report said.
China’s proven crude oil deposits account for 33 percent of total estimated resources of the fuel, and natural gas makes up 14 percent, it said.
“We are at the medium stage of oil exploration and early for natural gas,” the report said. “There is great potential for further development.”
China National Petroleum said Dec. 5 that the nation’s oil demand may rise 4.5 percent annually through 2015, because of its growing economy and population.
Oil use may reach 515 million metric tons a year (10.3 million barrels a day) by 2015 from 346 million tons in 2006, the Beijing-based oil producer said at the time.
China’s economy expanded 11.5 percent in the first three quarters, increasing demand for energy. The nation will replace the U.S. as the world’s largest energy user early next decade, as the rise in manufacturing and sales of cars and trucks boost consumption of diesel, gasoline, fuel oil, coal and natural gas, the International Energy Agency said Nov. 7.
Tags: Petroleum