China Becomes More Independent on Oil Imports

China's dependence on crude oil imports has dropped for the first time in the past two decades in 2021, from 73.6 percent in 2020 to 72 percent in 2021, official figures said.

Total crude imports declined last year to 513 million metric tons, down 5.3 percent year-on-year－the first time it has fallen in the past 20 years, the China Petroleum and Chemical Industry Federation (CPCIF) said.

Analysts attribute the drop of crude imports and decreasing energy dependency to increasing efforts by domestic energy companies in local oil field exploration and exploitation in the past few years, which has further enhanced domestic energy security.

Fu Xiangsheng, vice-chairman of the CPCIF, said the country's major oil companies, including China National Petroleum Corp, China Petroleum and Chemical Corp and China National Offshore Oil Corp, have ramped up exploration investment during the past few years with a batch of oil and gas fields coming on-stream, which in turn contributed significantly to the country's decreasing reliance on oil imports.

China has made tremendous progress in increasing domestic oil and gas production over the past few years, and is also becoming more self-sufficient in energy supplies thanks to rising domestic oil and gas production in recent years, said Luo Zuoxian, head of intelligence and research at the Sinopec Economics and Development Research Institute.

The oil majors' mastery of oil and gas exploration technology has also been gradually on the rise, which will inject momentum into reform of the country's future oil and gas systems and mechanisms, Luo said.

CNOOC, the country's top offshore oil and gas driller, said its planned capital expenditure for 2022 will be between 90 billion yuan ($14.14 billion) and 100 billion yuan, with exploration, development, production and others to account for approximately 20 percent, 57 percent, 21 percent and 2 percent, respectively, of total its spending.

It will also introduce 13 new oil and gas fields this year, while it also plans to drill 227 offshore exploration wells and 132 onshore unconventional exploration wells.

The country's oil behemoths have also stepped up construction of storage facilities and accelerated building of trunk oil and gas pipelines to ensure domestic energy security.

The China Offshore Energy Report released by the CNOOC Energy Economics Institute, a think tank under China National Offshore Oil Corp, said China is becoming more self-sufficient in energy supplies in recent years, with the energy self-sufficiency rate reaching more than 80 percent in 2021.

China's energy self-sufficiency rate has been on a steady growth track in recent years, with the country's total energy production rising to 4.18 billion tons of standard coal last year, up 2.5 percent year-on-year, it said.

Fu said while the country's ongoing efforts to peak carbon by 2030 and achieve carbon neutrality by 2060 led to falling oil imports, the high oil price also contributed to a decline in imports.

The federation said oil and gas equivalent last year rose 5.1 percent year-on-year. Crude output rose 2.4 percent year-on-year to 199 million tons, up for the third consecutive year, while domestic gas production rose to 205.3 billion cubic meters, up 8.2 percent year-on-year.

The domestic petrochemical industry saw its total revenue reach 14.45 trillion yuan last year, up 30 percent year-on-year. Total profit for the first time exceeded 1 trillion yuan to 1.16 trillion yuan, up 126.8 percent year-on-year. Both revenue and profit rose to record highs.

According to Fu, domestic crude processing volume exceeded 700 million tons last year, up 4.3 percent year-on-year. Total output of major chemicals rose 5.7 percent year-on-year, he said.

The total amount of petrochemical companies also rose for the first time in five years to 908, a result of the country's efforts in weeding out outdated capacity and shutting down polluting petrochemical companies.

Shutting down the polluting and outdated capacity left room for those with better technologies and management advantages, Fu said.

The federation forecasts that the petrochemical industry in China, though still challenged with uncertainty from COVID-19, downward pressure on the economy, uncertain product prices, and strained supply chains, has numerous opportunities this year as China's petrochemical market has much room for further expansion.

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China is capable of ensuring adequate domestic energy supplies despite rising energy prices and global security concerns, analysts and industry executives said.

Global oil and gas demand has been emerging from the shadow of the COVID-19 pandemic with a clear rebound. But, oil prices are expected to remain high this year due to geopolitical tensions.

China is capable of meeting its domestic oil and gas demand as the country has been stepping up domestic oil and gas exploration in recent years, said Luo Zuoxian, head of intelligence and research at the Sinopec Economics and Development Research Institute.

Major Chinese oil and gas players have been intensifying exploration investments over the past few years. China has also made several major breakthroughs in both conventional oilfields and unconventional oil and gas sectors, he said.

US President Joe Biden on Tuesday announced a ban on all imports of Russian oil, gas and energy to the United States, while the United Kingdom is to phase out imports of Russian oil by the end of 2022. The European Union aims to slash Russian gas imports by two-thirds this year as part of its plans to cut its dependence on Russian gas imports.

As a result, oil prices jumped to record highs with WTI crude oil popping as much as 7 percent to trade above $128 per barrel on Tuesday and Brent crude oil, the international benchmark, jumping 7.7 percent to $132.75.

"The European Union's plan to cut import needs from Russia by two-thirds this year has sent shock waves across the globe. To fill the void of around 100 bcm, the EU needs to grab much more spot liquefied natural gas than before, which inevitably leads to high prices and limited spot supply for other regions," said Li Ziyue, an analyst with Bloomberg NEF.

"China needs to plan accordingly to source enough LNG to meet domestic gas demand. Expensive spot LNG may also curb Chinese buyers' appetite for the fuel," she said.

China National Petroleum Corp said on Tuesday that the company will come up with advanced and thorough planning in the face of the current situation of the global energy market. It vowed to step up natural gas production capacity construction, including gas storage tanks, to further optimize allocation of resources.

Ensuring adequate supplies of natural gas in the days to come will likely prove not only complex but also challenging, and the company should further strengthen international cooperation and allocate resources according to the changing market situation, in order to ensure a steady gas supply, said Hou Qijun, vice-president of CNPC, during a meeting on Tuesday.

China Petroleum and Chemical Corp, or Sinopec, the world's largest refiner by volume, has signed a memorandum of understanding with Saudi Arabian Oil Company, which is widely known as Aramco, on Tuesday for potential downstream collaboration in China.

The two sides will also support Fujian Refining and Petrochemical Co Ltd in conducting a feasibility study into the optimization and expansion of capacity.

Analysts said the cooperation is mutually beneficial in crude trading, refining and engineering services as well as science and technology research and development.

Such collaboration represents a model of energy cooperation between China and Saudi Arabia. The signing of the MoU will support refinery feedstock optimization and downstream petrochemical development, while offering new opportunities to deepen and expand activity amid an accelerating global energy transition, said Yu Baocai, president of Sinopec.

China's National Energy Administration said the country will ensure energy security this year by boosting coal supply capacity, stepping up oil and gas exploration and oil and gas storage capacity construction.

Meanwhile, China will also accelerate solar and wind power generation capacity construction in the Gobi Desert and other arid regions amid efforts to boost renewable power consumption, while coming up with more peaking power sources, including pumped storage, to ensure efficient and effective power generation, said Zhang Jianhua, head of the administration.