China surpassed the U.S. to become the world's biggest crude oil importer in 2017, the Energy Information Administration (EIA) said Monday in a statement.
While China imported 8.4 million barrels per day (mbpd) of crude oil, the U.S. imported 7.9 mbpd of crude in 2017, according to the EIA.
"New refinery capacity and strategic inventory stockpiling combined with declining domestic oil production were the major factors contributing to the recent increase in China’s crude oil imports," the statement said.
The EIA said 56 percent of China’s crude oil imports came from OPEC countries in 2017, marking a 67 percent decline from 2012 when China's imports from the cartel peaked.
Between 2012 and 2017, however, China imported more crude oil from Russia and Brazil instead. While Russia's market share in Chinese imports rose from 9 percent to 14 percent between those years, Brazil's share increased from 2 percent to 5 percent, according to the EIA.
Moreover, Russia surpassed Saudi Arabia to become China’s largest source of foreign crude oil in 2016. Russia exported 1.2 mbpd of crude oil to China in 2017, compared to Saudi Arabia’s 1 mbpd, the EIA said.
-Decline in domestic production
Another major factor behind the increase in China’s crude oil imports was with the country having the largest decline in its domestic petroleum and other liquids production among non-OPEC countries in 2016.
The EIA said it estimates China also had the second-largest decline in its domestic petroleum and other liquids production in 2017, noting that China was the world’s largest net importer of total petroleum and other liquid fuels in 2013.
Total liquids production in China averaged 4.8 mbpd in 2017, which is a 0.1 million mbpd, or a 2 percent, decline from 2016, the EIA said, adding it expects further declines in China's total liquids production during 2018 and 2019.
-Growth in consumption, higher refinery runs
The EIA said it estimates that growth in China's consumption of petroleum and other liquid fuels in 2017 was the world’s largest for the ninth consecutive year, rising 0.4 mbpd, or 3 percent, to 13.2 million mbpd from the previous year.
"As China has built up inventories of strategic petroleum reserves, China’s crude oil imports have increased faster than their domestic consumption. In addition, China has reformed its refining sector by reducing restrictions on both imports and exports," the statement said.
China granted crude oil import licenses to independent refineries in northeast China since mid-2015, according to the EIA, increasing refinery utilization and crude oil imports.
Another reason behind China’s rising crude oil imports is higher refinery runs and greater refinery capacity.
China’s refinery runs rose by an estimated 0.5 mbpd in 2017 to 11.4 mbpd, partly due to two refinery expansions in the second half of 2017, according to the EIA.
There was a 260,000-bpd refinery in Anning in the Yunnan province that started operating in the third quarter of 2017. The China National Offshore Oil Corporation’s (CNOOC) Huizhou refinery increased capacity by 200,000 bpd and increased its imports from various sources in the third and fourth quarters of 2017, it added.
Moreover, ongoing infrastructure expansions will likely contribute to further increases in China’s crude oil imports, according to the EIA.
In January 2018, China and Russia began to operate an expansion of the East Siberia-Pacific Ocean (ESPO) pipeline, doubling its delivery capacity to approximately 0.6 mbpd, the administration said.
"According to trade press reports, as much as 1.4 mbpd of new refinery capacity is planned to open in China by the end of 2019," the statement said.
"Given China’s expected decline in domestic crude oil production, imports will likely continue to increase over at least the next two years," it added.
By Ovunc Kutlu