BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

China Is The World’s Largest Oil & Gas Importer

Following
This article is more than 4 years old.

Everybody knows that China has been leading the world in new oil and natural gas demand, except for last year when the U.S. did it. But, what is not so commonly known is that China is now the largest oil and natural gas importer.

This is a really big deal for other consumers: oil and gas supply over 60% of the world’s energy.  China has 1.4 billion people, a government obsessed with economic growth, energy usage that accounts for 25% of the world’s total, and an ever-extending global reach that has procuring energy supplies at its core, namely oil and gas in any area, any country at any time. Oil and gas constitute a rising 30% of China’s total energy demand.

For Chinese leadership, this continuous need to rely more on outside help to get the energy to grow the economy is ultimately problematic. All one has to do is see The Great Wall itself to know that China has enhanced self-sufficiency has a foundation of its 5,000 year-old civilization.

This helps explain why China is highly active in heavily oil- and gas-resourced Africa, the Middle East, Canada, and South America. As we unrealistically debate “the end” of oil and gas, the Chinese know that these fuels will remain indispensable for decades to come. Just like Vladimir Putin and OPEC, the Chinese know that our unrealism works greatly to their advantage, as U.S. and global demand continue to mount.

Since 2013 alone, China’s oil production has fallen nearly 15%, while its oil demand has risen 30% to ~13.8 million b/d. In turn, China relies on imports for around 75% of its total oil usage. China also likes to buy crude when prices are low to stockpile its security inventories, a “rainy day” supply that could currently cover about 80 days of imports. September crude imports were up 11% YoY.

Up from basically zero a decade ago, China’s natural gas import reliance is a rising 45% – despite a doubling in domestic production. Turkmenistan supplied 70% of China’s piped gas imports in 2018, but the 38 Bcm Power of Siberia project will link the country to mighty Russia starting this December 1.

Two years ago, the Chinese government announced that third parties could negotiate prices and gain access to both pipelines and LNG import terminals. China’s LNG imports boomed a whopping 40% in 2018, amazing considering that at ~6.6%, the country’s economic growth was the lowest since 1990.

Although consuming nearly three times more gas in total, China’s LNG imports are still about 25% less than that of Japan. China, however, will surpass Japan before 2022 to become the largest LNG buyer in the world. The two now account for 45% of all LNG imports but a nuclear re-start program will drop Japan further down the LNG list.  

LNG – the fastest growing traded commodity that is turning longtime regional product natural gas into a global commodity like oil – will remain a staple in China’s energy demand structure. Already pipeline short, China’s giant cities are located in the southeastern part of the country by water, making sea-borne delivery a natural fit.

Gas demand in particular has huge potential because this cleaner modern fuel still only accounts for just 7-9% of China’s total energy demand, well below the 30% gas holds in the fully developed nations like the U.S. Simply put, China has really just started using natural gas, which is why the trade war has U.S. LNG sellers so concerned.  

China will remain the key incremental oil and gas market for the next decade. A conservative estimate is at least a doubling in LNG imports alone by 2030. By then, however, I do see India surpassing China as the driving force behind new consumption. India has a faster growing population and is much more energy-deprived, very sadly so. Huge supplies are a requirement to advance a still very poor population. Per capita, for instance, the Indians use just 1/5 of the electricity that the Chinese do.


Follow me on Twitter