Global Economy: China’s Relationship to Oil Markets
China is the fourth largest producer of oil in the world. China’s oil industry is currently flourishing, exporting around 6.7 million barrels of oil a day in 2015. China’s biggest crude oil companies are state owned. Sinopec is one of the largest of the companies and has the highest consolidated revenue among all the state-owned oil companies.
The company nearly produced 361 million barrels of crude oil in 2014. It was established in 1998 and it performs a vast range of operations from exploration to drilling and retail sales. China National Petroleum Corporation or CNPC is the second biggest oil producer by consolidated revenue producing nearly 1.2 billion barrels of crude oil in 2014 and making a consolidated revenue of $425 billion.
Most of CNPC’s operations are organised by a subsidiary group. China National Offshore Oil Corporation or CNOOC was established in 1983 for the exploration for oil and gas in China’s offshore waters. It topped crude oil production with 501 million barrels in China. In early China, oil was primarily used as a lubricant.
Many tools where brought in from Szechuan and China slowly developed distillation plants. Wells were drilled in Yu Men which had a capacity of about 1000 barrels of oil. This was the first major oil field in China. In 1959, large reserves were discovered in Songhua Jiang- Liao basin. Around 1973, China had started to export crude oil to Japan and began offshore explorations.
China’s Internal Oil Demand
It was during this period that commodity trading figures showed China’s internal demand for oil grew, and the country became a net importer of oil. Although China was a major producer of crude oil, by 1993 it had become dependent on imported oil. In the later 2000s, China imported around 50% of its total oil consumption. In 2013, China’s oil fields were damaged due to flooding and couldn’t cope with the demand.
China was then forced to import high quantities of Oil to compensate for the reduction in supply. China’s heavy reliance on oil has caused the oil fields of China to rapidly age. Many predict that China’s production of oil will drop by 5-7% by the end of the year. Although it is true that China’s advanced technology can slow the ageing of the fields, it cannot altogether stop the structural trend.