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China Oil and Gas Report Q4 2011
Business Monitor International, Sep 2011, Pages: 131
Business Monitor International's (BMI) China Oil and Gas Report Q4 2011 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 from BMI forecasts that the country will account for 37.18% of Asia Pacific regional oil demand by 2015, while providing 52.20% of supply. Regional oil use of 26.07mn barrels per day (b/d) in 2010 is forecast to rise to around 30.22mn b/d by 2015. Regional oil production was around 7.92mn b/d 2010. It is set to decrease to 7.88mn b/d by 2015. Oil imports are growing rapidly, because demand growth is outstripping the pace of supply expansion. In 2010, the region was importing an average 18.15mn b/d. This total rises to an estimated 22.34mn b/d in 2015. The principal importers will be China, Japan, India and South Korea. By 2015 the only net exporter will be Malaysia. In terms of natural gas, in 2010 the region consumed around 513.3bn cubic metres (bcm) and demand of 664.9bcm is targeted for 2015. Production of 406.0bcm in 2010 should reach 556.7bcm in 2015, implying net imports falling from around 112.3bcm to 111.8bcm. China’s share of gas consumption in 2015 is put at22.28%, while its share of production is estimated at 15.76%.
Global GDP growth in 2011 is forecast at 3.2%, down from 4.3% in 2010. Growth in the Eurozone should be marginally higher than 2010, while US and Chinese economic expansion will slow and Japan’s growth will be negative, reflecting the devastating earthquake and tsunami in March 2011. BMI’s oil price assumption for 2011 is US$101.90 per barrel (bbl) for the OPEC basket, falling to US$97.50/bbl in 2012.
Chinese real GDP growth in 2011 is estimated by BMI at 8.94%. The authors are forecasting average annual growth in 2011-2015 of 7.73%. While partly privatised, the oil and gas industry remains under state control, with PetroChina, Sinopec and CNOOC charged with maintaining domestic production. BMI is assuming oil and gas liquids output of no more than 4.11mn b/d by 2015, although the country is thought to have pumped 4.08mn b/d in 2010. Oil consumption is forecast to increase by around 19.2% in 2011- 2015, implying demand of 11.24mn b/d by the end of the forecast period. The import requirement would therefore be about 7.12mn b/d by 2015.
Between 2011 and 2020 BMI is forecasting a decrease in Chinese oil production of 4.48%. Crude volumes should peak in 2014 at 4.14mn b/d, then fall steadily to 3.90mn b/d in 2020. Oil consumption between 2011 and 2020 is set to increase by 39.18%, with growth slowing to an assumed 3.0% per annum by the end of the period and the country using 13.12mn b/d by 2020. Gas production is expected to rise steadily, from an estimated 84.8bcm in 2011to a possible 97.7bcm by 2020. With demand growth of 96.4%, this provides an import requirement rising to 112.1bcm – increasingly in the form of liquefied natural gas (LNG). Details of BMI’s 10-year forecasts can be found at the end of this report, which provides regional and country-specific projections.
China is now ranked fourth, just ahead of Japan, in BMI’s composite Risk/Reward ratings league table. It holds ninth place in BMI’s updated upstream 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. China falls into third place, just behind Japan and South Korea in BMI’s downstream 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 is poised to soon take regional leadership.
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