China's petroleum products demand to double by 2010

June 7, 1999
China's long-term energy demand growth forecast looks healthy, although Asia's recent economic turmoil has dampened energy demand in the short term. This is the view of Datamonitor plc, London, which said that, while coal will remain China's primary energy source because of the country's huge resources of that fuel, consumption of electric power and oil products are set to rise.

China's long-term energy demand growth forecast looks healthy, although Asia's recent economic turmoil has dampened energy demand in the short term.

This is the view of Datamonitor plc, London, which said that, while coal will remain China's primary energy source because of the country's huge resources of that fuel, consumption of electric power and oil products are set to rise.

The analyst predicts that China's power and petroleum products demand will rise rapidly over the next 20 years, driven by the country's burgeoning economic growth, changing economic structure, and improving living standards.

Petroleum products demand

In particular, demand for petroleum products in China is expected to more than double by 2010, while the country is expected to add a total of 1.8 million b/d of new refining capacity by 2010 to its current level of 3.5 million b/d.

Datamonitor said China's crude oil consumption will increase to 9 million b/d by 2010 from 4 million b/d now: "As has been the case over the last decade, demand for crude oil will grow at a higher rate than domestic production, meaning that import dependency will continue to rise."

The analyst predicted that China will import 1.5 million b/d in 2000, with imports rising to 3 million b/d by 2010 (see related story, p. 24). Similarly, increasing demand for petroleum products will spur construction of new refineries.

The increase in refining capacity is expected to come from consolidation of existing inefficient, small refineries and the addition of new plants: "As the Chinese refining sector will be forced to open to foreign investors, it is expected that foreign refiners will directly contribute to one-third of new refining capacity by 2010."

China's total consumption of diesel fuel, fuel oil, gasoline, and liquefied petroleum gas is expected to grow to 7 million b/d by 2010, up from 3 million b/d today, with LPG use showing the fastest growth.

LPG consumption is predicted to soar to 2.2 million b/d by 2010 from 300,000 b/d today, while diesel fuel demand is expected to jump to 2.9 million b/d from 1.1 million b/d.

Meanwhile, Datamonitor said that the shape of the Chinese crude oil and petroleum products markets are expected to be changed significantly by the current restructuring of the state petroleum firms and the government's move to encourage foreign participation.

Though only two western firms have equity in Chinese refineries-Total with a 20% interest in the Dalian plant and ARCO with a 9.9% stake in the Zhenghai complex-further foreign participation is anticipated in the next 10 years.

Among reasons for growing foreign involvement in Chinese projects Datamonitor cites: an increasing reliance on high-sulfur Middle East crude oil, requiring China to upgrade its refineries; intensified domestic competition forcing Chinese firms into foreign alliances; and government difficulties in financing new refineries, leading to increased reliance on equity joint ventures with foreign partners.

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