[kublikhan]

$this->bbcode_second_pass_quote('', 'C')hina recently surpassed the US as the world's largest net oil importer, as the US produces more and consumes less while Chinese demand steadily increases. US net oil imports have fallen from a peak of 13 million barrels per day in October 2006 to under 6 mmb/d in December 2012, according to a Citi research note issued February 28, titled "Milestones Toward US Energy Independence - Alert: US net Oil Imports Plummet to Second Place Behind China."

Meanwhile, since China flipped from a net exporter to a net importer of oil in 1993, its net oil imports have risen steadily to 6.3 mmb/d in January 2013, just under last May's peak," the Citi analysts said in the note.

[Plantagenet]

China was already the world's largest CO2 emitter. They might as well be the world's largest oil importer as well

[John_A]

$this->bbcode_second_pass_quote('kublikhan', '')$this->bbcode_second_pass_quote('', 'C')hina recently surpassed the US as the world's largest net oil importer, as the US produces more and consumes less while Chinese demand steadily increases. US net oil imports have fallen from a peak of 13 million barrels per day in October 2006 to under 6 mmb/d in December 2012, according to a Citi research note issued February 28, titled "Milestones Toward US Energy Independence - Alert: US net Oil Imports Plummet to Second Place Behind China."

Meanwhile, since China flipped from a net exporter to a net importer of oil in 1993, its net oil imports have risen steadily to 6.3 mmb/d in January 2013, just under last May's peak," the Citi analysts said in the note.

[TheDude]

China poised to become the world’s largest net oil importer later this year



$this->bbcode_second_pass_quote('', 'E')IA's August 2013 Short-Term Energy Outlook (STEO) forecasts that China's net oil imports will exceed those of the United States by October 2013 on a monthly basis and by 2014 on an annual basis, making China the largest importer of oil in the world.
The imminent emergence of China as the world's largest net oil importer has been driven by steady growth in Chinese demand, increased oil production in the United States, and a flat level of demand for oil in the U.S. market.

[peripato]

$this->bbcode_second_pass_quote('', ' ')Pundits have been predicting the coming end of the Chinese Tiger for seemingly ever now.

[BobInget]

If China is really selling two million cars and trucks a year, this makes predictions easier.
Simple arithmetic tells us, in ten years, China will need every liter of crude available for export.

[Graeme]

China Soon to Be World’s Top Net Oil Importer

$this->bbcode_second_pass_quote('', 'C')hina is poised to surpass the U.S. as the world’s largest net oil importer in October, according to new estimates from the U.S. Energy Information Administration. The growing oil thirst of the world’s second-largest economy carries significant economic, environmental, and geopolitical implications.

In the U.S., annual consumption of liquid fuels is no longer increasing, according to the EIA. Meanwhile, domestic production of shale oil, tight oil, and shale gas (among other alternative energy sources) has been growing quickly in recent years. The EIA projects the U.S.’s total annual oil production will grow 28 percent from 2011 to 2014, lessening the country’s dependence on foreign oil.

China faces a nearly opposite scenario: Domestic oil demand is expected to grow 13 percent between 2011 and 2014, whereas oil production will expand just 6 percent over this period. As a result, China must import an increasing percentage of its oil. (It now imports roughly 60 percent.) “It is only a matter of time for China to surpass the U.S. in net oil imports,” Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University recently told the state-run Global Times newspaper. “The most important thing is to find solutions because as the largest oil importer, China will be very vulnerable to oil price changes.”

[ROCKMAN]

The increase in Chinese oil imports is one factor to consider. But so are the numerous refinery JV's they're doing with various oil exporters. Production diverted to those refineries won't be counted in the Chinese import numbers but represent a loss of oil available to all the importers. The question then becomes the ultimate destination of the refinery products. Time will tell.

[TheDude]

As partners in building those refineries aren't the PRC entitled to some minimum cut? I'm puzzled why any oil imported into China through whatever avenue wouldn't be counted in their import numbers, too. Haven't followed this saga much and would like to know more.

[Plantagenet]

China is just starting to frack its shales. It will be interesting to see how much oil China can produce internally from oil shale fracking, and how long that production lasts.

[ROCKMAN]

Dude - Each JV will have it's own terms. Haven't seen such details on any one of them...and may never. But take the China/KSA 400k Red Sea refinery. I think the cost will be split 50/50. But details? How will the price of the KSA crude be benchmarked? How will out put be split...the KSA has a big product import bill. Will the KSA get their product at cost or benchmarked? Will China have control over exported products? Will China have a right of first refusal on exported products? Products exported and sold: how is the profit split? Is China loaning the KSA their share of the construction costs or vice versa? Will the plant be manned with Saudi or Chinese workers? In the JV with Iraq the Chinese built their own airport to shuttle their workers back and forth.

As far as import volumes it's easy: oil is oil, diesel is diesel, etc. Count each separately. But the real issue is whose refineries will be supplied and thus book the profits. For instance China plans to build the largest refinery ever constructed in Egypt... a country with little relative oil production. But there are 2 to 4 million bbls of Persian Gulf oil per day that transits Egypt via the S. Canal and the SUMED pipeline. It's shipped out of the Med port to EU refineries. Seems obvious this crude will be sourced from the Persian Gulf exporters. They may still sell every bit of product to the EU but now it would be the Chinese and oil exporters capturing that segment of the value stream. And then there's the big potential stick for China: the option to ship some or all of the product to their homeland. Same potential with the big Brit. Columbia refinery the Chinese will finance. Initially they may sell all those products cracked from the oil sands fields to CA because that's where the best profit could be had. OTOH I would be shocked if part of the loan terms didn't give China the right of first refusal and could allow them the option to ship all the product to China. A ROF is easy to negotiate: the seller, in this case the Canadians, get the same price either way and thus costs them nothing. But now the Bank of China controls who gets to buy the product...mucho leverage.

The next big deal that might significantly impact the US would be refinery JV's between China and México. Now México has to sell crude to US refineries but buy back as much as 1/3 of the products. Pemex doesn't have the refining capacity. Just a matter of México getting the constitution adjusted to allow such deals. México also has a huge trade imbalance with China. Selling China oil would help that. They've already begun that on a small scale...50k bopd I think.

[ROCKMAN]

Dude - Check out rigzone.com today. Long article that goes into great detail on how Mexico hopes to change their energy sector big time that could fit China's long term energy plans perfectly.

[ROCKMAN]

jf – I’m probably more focused on the right of first aspect then many because it was ground into me deeply early in my career. In that case it had to do with NG sales in the US but the leverage was the same as with the Chinese refinery JV’s. In the late 70’s NG was really beginning to boom. I worked for a NG pipeline company. Their entire revenue stream was based on charging a transport fee for shipping NG from the Gulf Coast to the east coast. They didn’t own the NG…just transported it. Such p/l systems are very expense to build and take many years just to recover their initial costs let alone make a profit. But revenue was a very simple calculation: ship X cu ft of NG and make $Y.

The problem came about when other transport systems were developed. Same amount of NG shipped and more pipelines = less revenue per p/l company. So what p/l companies started doing was investing in drilling programs. And part of the trade: by providing exploration companies with capex the p/l company got a ROF to transport the NG to end markets. It was a very lucrative trade for the p/l companies even if they only broke even on their drilling investments: spend $100 million drilling and get $100 million back…but made $30 million transporting the NG. And this approach was also taken by a number of NG utility companies that sold NG to industrial and household consumers along the east coast: if they didn’t have NG to supply their customers they lost money. Four of the utilities that my p/l company delivered to joined us in our drilling program. And part of their leverage: they didn’t have to pay my company the transport fee to deliver their NG to them. The p/l company I worked for was not very good at this type of game and eventually went under and was acquired by another p/l company.

Now consider the same leveraged used with the Chinese refinery JV’s. China could afford to pay top $ for the oil run thru those refineries even to the point of just breaking even. But then they have the profits margins from the refinery. But potentially more valuable: in a tight product market the option to ship some or all of the products back to China and deliver them at cost. Rather nice when the product prices are shooting up. Consider the huge refinery JV in Egypt: the Chinese can pay the Persian Gulf producers top $. And now make the profit the EU refineries use to make. And maybe more: what will the price of products in the EU look like if China sudden usurps that oil the EU refiners used to sell. And then how much worse will it hit the EU economy if instead of selling those products at high prices to the EU they ship them back to China?
And for the oil exporting partner: most, like the KSA, are major product importers. Not only won’t they have to pay those higher product prices in a tight market they may get their JV products below market prices. And equally important in a tight market when not everyone can buy what the desire even if they have the money the KSA has a guaranteed supply.

The importance of access to oil by the refiners is being highlighted these days. The refineries on the US east coast were on the verge of extinction. They had to buy expensive N Sea and African oil. Now more western US and Canadian oil is making its way to them and profit margins are rising. But there are losers in the process. Nigeria for one: they’ve lost about half the export volume to the US and Canadian refineries. But don’t worry too much about them: China is talking about building 3 new refineries in Nigeria and spending upwards of $100 billion in total oil infrastructure. Thus Nigeria and China will be able to capture to capture more of the value stream by selling products instead of oil.

At the moment this potential leverage may not seem to be a great edge. But in 5 to 15 years it may make the difference between which economies get slightly wounded by PO and which are driven into deep recession or even depression.

[dolanbaker]

RM, you just responded to a spambot!

[ROCKMAN]

donlan - Everyone here, including the non-organic, deserves respect and a response. I'm shocked...I would have never taken you for a organoracist. LOL.

BTW have you noticed that I never need much encouragement to mouth off.

[dolanbaker]

It's good to get the point across, even if the the choir has robotic tendencies.
It's the ones who don't want to listen, that are the hardest nuts to crack.

[ROCKMAN]

db - If you haven't noticed I've become obsessed with the notion of oil and product control. I honestly don't think much about gross oil production rates all anymore. It doesn't matter to me if the KSA can maintain their current rate for the next 30 years. What's important is, first, how much they'll export as a result of ELM (their increasing internal consumption) and second, how much of their exports will be committed long term to those refinery JV's. In the short term maybe not as much impact on the US but I can imagine the EU/Britain starting to get pinched rather hard in the next 5+ years.

[dolanbaker]

RM, well the alarm bells are starting to ring in the minds of business leaders in the UK over the rapid decline in North Sea production.

http://www.bbc.co.uk/news/uk-scotland-s ... s-23771338

$this->bbcode_second_pass_quote('', 'T')he sharp decline in production of oil and gas from under British waters is "worrying" industry leaders.

Trade body Oil and Gas UK says there is record investment this year of £13.5bn.

But its annual report on the industry's economic impact highlights the sharp fall in output of 19% during 2011 and 14% in 2012.

It says the industry's latest estimates of the continuing decline suggest a further fall of at least 8.5% during this year, with no recovery next year.

Only from 2015 should the current high level of investment begin to have an impact on raising output.

However, the level of investment will fall from £13.5bn this year to between £8bn and £10bn from 2015

[ROCKMAN]

db - For some time I've felt the UK might be a model for the US PO future. Granted the US has a huge reserve base and an oil industry better designed to squeeze the last drop out. But we still use more oil than we produce and though larger our reserve base is still finite. We may be 15 to 20 years behind the UK path but we're still on the same path IMHO. A country’s economy is either dependent upon energy imports or not. The US, like the UK, is and IMHO will always be.

The UK and EU also seem to have the potential to be the first major victims of the Chinese gaining control over more ME oil and refined products. But if China keeps slipping its nose further under the Mexican and Venezuelan tents the US may start feeling that pinch sooner than many might expect.

[Graeme]

Within Four Years, China To Consume More Oil Than U.S.

$this->bbcode_second_pass_quote('', 'T')he U.S. is on its way out as the world’s No. 1 oil importer, according to energy market researchers at Woods Mackenzie. That coveted (or not so coveted) title will belong to none other than China. As if anyone would be surprised.

According to the report, China will spend $500 billion a year on crude oil imports by 2020.

“The price China pays will far outstrip the peak cost ever incurred by the U.S. of $335 billion annually with U.S. import spend falling to only $160 billion annually by 2020,” Wood Mackenzie said in a press release last week.

This isn’t the greatest news for China, to be honest. It might be supportive of oil futures, but oil is the most costly, volatile fossil fuel around. The government wants to go green. This study suggests that Beijing is way off the color wheel.

Moreover, pressures from international bodies to reduce carbon footprints as climate change has beach fronts eroding in surprising numbers around the world will undoubtedly pressure Beijing to find alternative sources of energy. As it is, the country is already engaging in skirmishes with Japan in the East China Sea because of oil.

From 2005 to 2020, China’s oil imports will rise from 2.5 million barrels per day to 9.2 million barrels a day. U.S. imports will fall from a peak of 10.1 million to 6.8 million barrels per day within the same period. That roughly represents a 360% increase in China’s crude oil imports and a 32% decline for the U.S. during that period.

The turning point for Chinese crude oil imports to surpass the U.S. will be around 2017, Woods Mackenzie researchers said.

China’s growth in import demand can largely be attributed to its domestic oil demand growth, driven by cars and commercial ground transportation. Dr. Harold York, Principal Oils Markets Analyst of Woods Mackenzie said that although China consumes less oil per capita by international standards, “by 2020 China will be second only to the U.S. for the total fleet of personal auto vehicles in use. From 2005-2020, China will see the number of vehicles rise from 20 million to 160 million.”

That’s more cars on the road in China than there are people in Japan. And Beijing thought it was polluted now!