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China Oil and Gas Report Q3 2010
Business Monitor International, May 2010, Pages: 133
China Oil and Gas Report provides industry professionals and strategists, corporate analysts, oil and gas associations, government departments and regulatory bodies with independent forecasts and competitive intelligence on China's oil and gas industry.
The latest China Oil & Gas Report forecasts that the country will account for 36.75% of Asia Pacific regional oil demand by 2014, while providing 45.09% of supply. Regional oil use of 21.42mn barrels per day (b/d) in 2001 reached an estimated 25.84mn b/d in 2009. It should average 26.39mn b/d in 2010, then rise to around 29.59mn b/d by 2014. Regional oil production was around 8.35mn b/d in 2001 and averaged an estimated 8.47mn b/d in 2009. It is set to increase to 8.85mn b/d by 2014. Oil imports are growing rapidly because demand growth is outstripping the pace of supply expansion. In 2001 the region was importing an average of 13.07mn b/d. This had risen to an estimated 17.37mn b/d in 2009 and is forecast to reach 20.74mn b/d by 2014. The principal importers will be China, Japan, India and South Korea. By 2014 the only net exporter will be Malaysia.
In terms of natural gas, the region in 2009 consumed an estimated 477bn cubic metres (bcm) and demand of 648bcm is targeted for 2014. Asia Pacific gas production of an estimated 379bcm in 2009 should reach 531bcm in 2014, which implies net imports rising from around 98bcm to 117bcm. This is thanks to many Asian gas producers being major exporters. China’s estimated share of gas consumption in 2009 was 17.83%, while its share of production was 20.60%. By 2014, its share of gas consumption is forecast to be 20.08%, with the country accounting for 16.96% of supply.
We continue to predict a 2010 OPEC basket oil price level of US$83.00/bbl. This equates to Brent at US$85.11, WTI at US$88.22, Urals averaging US$83.62 and Dubai at US$83.14. As stated in our January 2010 quarterly report, the 2011 OPEC basket price assumption is US$85.00/bbl, rising to an average of around US$90.00 in 2012 and beyond.
For the whole of 2010, we are currently assuming an average global jet fuel price of US$95.00/bbl, compared with around US$70.66 in 2009. The 2010 average global gasoil price is US$91.95/bbl, against US$68.96 in 2009. The 2010 average naphtha price is estimated at US$81.19 – compared with US$59.30/bbl in 2009. For global unleaded gasoline, the authors are now forecasting an average US$96.00/bbl in 2010, up from around US$70.17/bbl in 2009.
Chinese GDP growth in 2009 is assumed to have been 8.4%, with 8.8% forecast for 2010. We are assuming average annual growth in 2010-2014 of 7.9%. While partly privatised, the oil and gas industry remains under state control with PetroChina, Sinopec and CNOOC charged with maintaining domestic production. We are assuming oil and gas liquids output of no more than 3.99mn b/d by 2014, although the country is expected to pump 3.95mn b/d in 2010. Oil consumption is forecast to increase by around 20.38% in 2010-2014, implying demand of 10.87mn b/d by the end of the forecast period. The import requirement would therefore be about 6.88mn b/d by 2014.
Between 2010 and 2019 we are forecasting a decrease in Chinese oil production of 6.08%. Crude volumes will peak in 2013 at 4.15mn b/d, then fall steadily to 3.71mn b/d in 2019. Oil consumption between 2010 and 2019 is set to increase by 40.92%, with growth slowing to an assumed 3.0% per annum by the end of the period and the country using 12.73mn b/d by 2019. Gas production is expected to rise rapidly, from an estimated 78bcm in 2009 to a possible 103bcm by 2019. With demand growth of 106%, this provides an import requirement rising to 89.6bcm – increasingly in the form of LNG. Details of the 10-year forecasts can be found to the rear of this report, which provides regional and countryspecific projections.
China is ranked third behind Australia and India in the composite Business Environment (BE) league table, reflecting its share of fifth place (with Papua New Guinea) in our updated upstream Business Environment Ratings. A strong resource position is countered by a less impressive regulatory structure and substantial state involvement. The risk environment is also less attractive than for some Asian peers. Over the medium to long term, China has the capability to progress further up the rankings and claim a higher slot in the upstream league table. The country is ranked outright first ahead of India in the downstream Business Environment Ratings, reflecting its status as a high-growth energy market with strongly positive population and demand trends, plus a low level of retail site intensity. It has established a three-point lead over India, and is six points clear of third-placed Singapore.
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