China's Oil Imports Will Hit 8m Bpd This Year
China's crude oil imports are set to top 400 million tonnes (8 million bpd) this year, a senior Sinopec Group official told Reuters this week.
The company's vice president, Zhang Haichao, told the newswire on the sidelines of an industry conference in Beijing on July 25 that low oil prices and declining domestic output would spur import growth this year.
If Zhang's predictions prove to be accurate then imports will climb by around 4.8%, or 370,000 bpd, this year from the 7.63 million bpd reported in 2016. However, it will represent something of a slowdown for the country, which has seen its crude purchases soar 14% year on year in the first half to 212 million tonnes (8.59 million bpd), according to General Administration of Customs (GAC) data.
If imports do reach 8 million bpd on average this year, it will likely make the country the world's largest importer on an annual basis for the first time.
This year's surge in imports is continuing despite a growing domestic glut of oil products that has prompted the NOCs to draw up plans to shutter 10% of national refining capacity in the July-September quarter in a bid to reduce local fuel stockpiles.
Crude import levels have been buoyed by the teapot refiners' more aggressive purchasing trends this year, as they strive to maximise import quotas to avoid Beijing reducing future permits.
The central government issued a second batch of "non-state trade" quotas in mid-June that, while higher than all of 2016's allowances, saw the independents' allotted volumes drop by 17% year on year.
The Ministry of Commerce (MOFCOM) granted 22.92 million tonnes (460,000 bpd) of import quotas to 32 companies, Reuters reported at the time, noting that this was up from the 29 companies in 2017's first round.
The recipients were mostly independent refiners, although some smaller state-run companies were also included. Major state players such as Sinopec, PetroChina and China National Offshore Oil Corp. (CNOOC) were excluded, however.
The latest batch took 2017's quotas to 91.73 million tonnes (1.84 million bpd), up from 87.6 million tonnes (1.76 million bpd) in 2016. The teapots, though, saw their allowances fall by 12.36 million tonnes (248,000 bpd) to 72.7 million tonnes (1.46 million bpd) for the whole of the year. The figure still represents a significant improvement on the independent downstream sector's realised imports of around 950,000 bpd last year.
Although China's downstream is in a period of transition, with the NOCs struggling to adjust to the private sector's new-found momentum, there are signs of a growing desire for co-operation on both sides of the fence.
Sinopec oil trading unit Unipec has said it wants to develop "really strong" ties with the country's teapot refiners.
At the same Beijing forum Zhang attended, Unipec president Chen Bo told Reuters: "I think in the future we will have a really strong relationship [with the private sector]."
It was the first time the state trader had publicly said it was open to doing business with independent refiners. The official added that Unipec would "provide any advantages we have", included the leveraging of its purchasing scale and flexible logistics.
The opportunity that working with Unipec represents for the private sector should not be underestimated. While gaining access to international oil markets has revitalised the teapots, private players have also struggled to take full advantage owing to their inexperience in securing the necessary financing for trades as well as logistical bottlenecks exposed during last year's crude buying ramp-up.
Shandong Chambroad Petrochemicals is a case in point. In April 2016, the company bought 730,000 barrels of crude oil directly from the world's biggest oil exporter, Saudi Aramco. But in June 2017's second round of import quotas the company saw its allocations trimmed back.
The company had been talking in September 2016 about seeking investors to help it build infrastructure to support increased gasoline exports, but since the central government failed to grant the private sector new fuel export quotas for 2017 this has become a non-issue.
But the company's concerns about infrastructure constraints are part of a larger pattern of discontent among small-scale refiners in Shandong Province over logistical bottlenecks around Qindao Port. The port has seen backlogs of crude tankers unable to unload their cargos owing to insufficient pipeline and storage capacity.