China surpassed the United States in yearly gross crude oil imports during 2017, importing 8.4 million barrels per day (b/d) in comparison to 7.9 million b/d for the United States. In 2013, China had become the world’s largest net importer of total petroleum and other liquid fuels. New refinery capacity and strategic inventory stockpiling combined with decreasing domestic oil production were the most important factors that contributed to the recent increase in China’s crude oil imports.
Namely, during 2017, the 56% of China’s crude oil imports, that experienced a decline from 2012’s 67% peak, came from countries within the OPEC.
Moreover, Russia and Brazil increased their market shares of Chinese imports between those years from 9% to 14% and from 2% to 5%, respectively.
Also, Russia surpassed Saudi Arabia as China’s largest source of foreign crude oil in 2016, by exporting 1.2 million b/d to China in 2017 in comparison to Saudi Arabia’s 1.0 million b/d.
OPEC and non-OPEC countries have agreed to decrease the crude oil production through late 2018, that’s why some countries had the chance to increase their market shares in China during 2017.
According to EIA, China had the largest decrease in domestic petroleum and other liquids production among non-OPEC countries in 2016, and it is expected to have the second-largest decline in 2017.
China reached a total of 4.8 million b/d concerning its liquid production in 2017, a decline of 0.1 million b/d (2%) from 2016 and more declined in both 2018 and 2019 are forecasted in EIA’s January 2018 Short-Term Energy Outlook (STEO).
On the contrary, EIA estimates that the growth in China’s consumption of petroleum and other liquid fuels during 2017 was the world’s largest for the ninth year in a row, increasing 0.4 million b/d (3%) to 13.2 million b/d.
China managed to reform its refining sector by decreasing restrictions on both imports and exports. Since mid-2015, China granted crude oil import licenses to independent refineries in northeast China, which have since increased refinery utilization and crude oil imports.
In addition, China’s crude oil imports have risen because of higher refinery runs and expanding refinery capacity. The refinery runs increased by approximately 0.5 million b/d in 2017 to 11.4 million b/d, driven in part by two refinery expansions in the second half of the year.
A 260,000 b/d refinery in Anning in Yunnan province started operating in the third quarter of 2017. The China National Offshore Oil Corporation’s (CNOOC) Huizhou refinery increased capacity by 200,000 b/d and increased its imports from various sources in the third and fourth quarters of 2017.
During January 2018 China and Russia began operating an expansion of the East Siberia-Pacific Ocean (ESPO) pipeline, doubling its delivery capacity to approximately 0.6 million b/d.
By the end of 2019, as much as 1.4 million b/d of new refinery capacity is planned to open in China.
Finally, given China’s expected decline in domestic crude oil production, imports will likely continue to rise for the two years following.