China's huge thirst for oil set to change world's energy flows
December 4, 2003
With its factories working overtime, and its consumers on course to buy almost 2 million cars this year, China is developing a world-class thirst for oil. And its hunt for steady supplies is reshaping the global energy scene.
China - which this year surpassed Japan as the No 2 petroleum user after the US - is increasing its oil purchases even faster than it is pumping up its brawny economy. Imports for the first 10 months of 2003 were up 30 per cent from year-earlier levels.
The International Energy Agency expects imports to double to some 4 million barrels a day by 2010. By 2030, China is expected to be importing about 10 million barrels a day, roughly what the US imports now. Domestic oil output, meanwhile, is flat.
From Houston to London to Moscow, oil companies are looking to secure market share in China, as China roams the world looking for oilfields to develop. And strategists are struggling to predict what China's rise as a super-buyer will mean for the oil market, the environment - and world politics.
"China is having an incredible influence on energy flows, not just in Asia but on a worldwide basis," Peter Davies, chief economist at BP, told reporters on a recent trip to Russia, from where BP hopes to supply China with Siberian gas. "The whole centre of gravity of the world energy market is changing."
So far, the most obvious impact has been on prices. In recent years, China has drawn fire in the US and Japan for exporting deflation, as its factories pump out cut-price T-shirts, sneakers, radios and other goods. In the $US1 trillion-a-year ($1.36 trillion) market for oil, the opposite is happening. This year and next, China is expected to account for about a third of the increase in global oil demand. China's purchases are an important reason the Organisation of Petroleum Exporting Countries has been able to keep the cost of a barrel of oil at or above $US30 a barrel for much of this year.
Chinese demand is also making geopolitical waves in the US. Last month, the US-China Economic and Security Review Commission, a committee of congressional appointees, debated how China's thirst for oil would affect US access to energy supplies. Last year, the Pentagon reviewed a report on what it would mean for US national security if the Chinese and Saudis grew closer. Saudi Arabia, the world's largest exporter, is negotiating to build a huge refinery in China with Exxon Mobil. The desert kingdom even has begun giving Chinese-language lessons to its oil officials.
The flip side of growing Chinese oil imports is increasing vulnerability. Used to having leverage over foreign multinationals seeking access to its market, China finds the shoe on the other foot as it is forced to compete with Japan and other buyers for oil.
