1

China’s Oil Outlook, Crude Imports and Energy Security

ByRobert Smith

FACTS Global Energy

Presented toIPAA 2006 Midyear Meeting

June 14, 2006Naples

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China's Official Real GDP Growth1986-2005

0%

2%

4%

6%

8%

10%

12%

14%

16%

86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05

Note: These rates reflect the justments done by the Chinese government in January 2006.

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Primary Energy Consumption Forecast for ChinaBase-Case Scenario, 1990-2015

10.0

15.0

20.0

25.0

30.0

35.0

40.0

45.0

50.0

55.0

1990 1995 2000 2001 2002 2003 2004 2005 2006 2010 2015

0%

10%

20%

30%

40%

50%

60%

70%

80%

Primary Energy Coal Share Oil Share Gas Share Hydro/Nuclear Share

(mmboe/d) Share

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Oil MarketsChina's Petroleum Product Demand

Base-Case, 1990-2015

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

10,000

11,000

90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09 10 11 12 13 14 15

Light Distillates

Middle Distillates

Heavy Distillates

(kb/d)

Note: 1990-2004 are actual, 2005 is preliminary, and 2006-2015 are projections.

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Upstream Oil DevelopmentsChina's Crude Oil Production by Field, 1978-2015

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

4,500

78 80 82 84 86 88 90 92 94 96 98 00 02 04 06 08 10 15

Daqing Shengli Huabei Liaohe Xinjiang/Tarim Offshore Others

(kb/d)

Note: Data is actual for 1978-2005.

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China's Crude Balance, 1995-2015

-6,000

-4,000

-2,000

0

2,000

4,000

6,000

8,000

10,000

95 96 97 98 99 00 01 02 03 04 05 06 10 15

Runs

Domestic Output

Imports

(kb/d)

Note: 1995-2005 are actual; 2006-2015 are projections.

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China's Oil Exports and Imports1980-2006

-5,000

-4,000

-3,000

-2,000

-1,000

0

1,000

80 81 82 83 84 85 86 87 88 89 90 91 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06

Crude Exports Product Exports

Crude Imports Product Imports

Net Oil Exports

(kb/d)

Note: 2006 data are projectins.

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China's Crude Imports, 20042,450 kbd

Africa 29%

Asia12%

Other 14%

Middle East45%

China's Crude Imports, 20052,542 kbd

Africa 30%

Asia8%

Other 15%

Middle East47%

China's Crude Imports, Jan-Feb 20062,969 kbd

Africa 29%

Asia7%

Other 17%

Middle East47%

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China's Crude Imports and the Share ofthe Middle East, 1993-2015

0

1,000

2,000

3,000

4,000

5,000

6,000

93 94 95 96 97 98 99 00 01 02 03 04 05 06 10 15

0%

10%

20%

30%

40%

50%

60%

70%

80%

Crude Imports

Share of ME Imports

(kb/d) Share

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Energy Security for ChinaChina has not yet established a full-ranged

energy security policy framework. However,

the following has emerged as the main

elements of the policy:

to enhance domestic oil and gas E&P activities

and maximize oil and gas production

to diversify the sources of oil and gas imports,

increasing the share of oil and gas imports

from Russia and Central Asia

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State Petroleum Reserves (SPRs)

NDRC is in charge of the work. The NDRC Bureau of Energy

is the home to the National Office of SPRs

Target for Phase I (by 2008): Approximately 16 million m3 or

100 million bbl (approximately 25 days of net imports). Phase

I construction has been underway since 2004

Target for Phase II (2010): Another 20 million m3 or 126 million

bbl, totaling 226 million bbl (approximately 45 days of net

imports)

In principle, the funds will come mainly from the state, but

also the state oil companies, which will manage and maintain

the facilities.

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• China’s Overseas Push:– State-owned companies have

established overseas upstream departments

• CNPC/PetroChina• Sinopec• CNOOC• Sinochem• ZhenHua Petroleum• CAOHC (China Aviation Oil Holding Co.)• CITIC

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Example of China’s Overseas Activities:

CNPC/PetroChina: Have investment and interest in

Kazakhstan, Peru, Sudan, Venezuela, Indonesia,

Algeria, Myanmar, Canada, Turkmenistan, Azerbaijan,

Mongolia, Thailand, Papua New Guinea, Angola, Libya,

Yemen, Iraq, Russia, Iran, Oman, Syria, Mauritania,

Nigeria, Brazil, Ecuador, and others.

Total oil production that CNPC is involved reached 716

kb/d in 2005, up from 271 kb/d in 2000. CNPC’s

overseas equity oil production was 400 kb/d in 2005, up

from 137 kb/d in 2000.

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Example of China’s Overseas Activities (cont’d):

CNOOC: Indonesia, Australia, Algeria, Morocco, Myanmar,

Canada, Nigeria, etc. CNOOC’s equity oil production was 30

kb/d in 2004, and is estimated to be higher in 2005.

Sinopec: Iran, Azerbaijan, Saudi Arabia, Canada, Brazil,

Kuwait, Yemen, Kazakhstan, Oman, Nigeria, Canada, etc. Its

overseas equity oil production was around 10 kb/d in 2005.

Sinochem: Thailand, Norway, Saudi Arabia, etc.

ZhenHua Petroleum: Kazakhstan

CAOHC (China Aviation Oil Holding Company): Spain, Dubai,

Singapore, and Hong Kong

CITIC: interests in the Middle East and Africa

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Thank You