By Michael Lelyveld
Despite the risks of an international conflict with Iran, China has increased its Persian Gulf oil imports in the past year.
Although China’s crude oil shipments from Iran dropped 21 percent from 2011 levels, supplies from Persian Gulf countries rose 3.5 percent to over 2.6 million barrels per day, General Administration of Customs data showed.
Total oil imports of 5.4 million barrels per day accounted for 56 percent of China’s consumption in 2012, according to calculations based on Reuters estimates.
The figures mean that China now relies on Persian Gulf countries for nearly half of its imports. Supplies from Saudi Arabia alone have more than doubled in five years, now averaging over 1 million barrels per day.
Oil from all foreign sources rose 6.8 percent last year, climbing nearly 90 percent since 2007.
Cause for concern
The increase in China’s import dependence has been a cause of official concern for years.
In 2006, the State Council issued a white paper on national defense, warning of mounting risks for “energy, resources, finance, information, and international shipping routes.”
China reached the threshold of 50-percent dependence on foreign oil for the first time in 2008 after its import share rose sharply from about one-third in 2003.
Last week, a report by state-owned China National Petroleum Corp. (CNPC) said import dependence “has created huge pressures on economic growth, making the country more vulnerable in energy security,” according to the official Xinhua news agency.
While reliance on imports has grown, it also seems to be getting more concentrated.
In 2011, nearly half of China’s foreign oil came from Middle East and North African countries. Last year, the same percentage came from Persian Gulf sources alone, despite Iran’s repeated threats to block the Strait of Hormuz.
Yet, the trend now seems to be drawing relatively little official attention or concern.
That may be because many other countries are in the same boat, said Edward Chow, senior fellow in the energy and national security program at the Center for Strategic and International Studies in Washington.
“They have the same risk that the rest of the world has,” he said. “Let’s face it, if there was an incident in the Persian Gulf, everyone would be affected.”
The last barrel
Like other importers, China has found that demand for additional oil, known in the industry as “the last barrel,” is most easily met by Gulf producers like Saudi Arabia.
“This is entirely predictable,” said Chow. “The last barrel comes from the Persian Gulf.”
The regional share of China’s oil imports is rising because the country is already importing as much as it can get from other sources, Chow said.
“They’re doing as much as they can,” he said. “Unless they can do something about demand, that’s going to continue to be the case.”
China’s import dependence is also increasing because domestic production has failed to keep pace with growth in demand.
While oil consumption rose 4.2 percent last year, China’s production increased only 1.6 percent to 4.1 million barrels per day, based on data from Reuters and the National Development and Reform Commission (NDRC).
The gap reflects the continuing challenges facing China’s oil industry, which has driven its surge in investments overseas since the 1990s.
Domestic crude output of CNPC, the country’s top producer, rose 2.6 percent from a year earlier to 2.2 million barrels per day, according to company figures.
Boosting foreign production
CNPC plans to boost its foreign production of oil and gas from nearly 40 percent of the company’s total to 60 percent by 2020, Xinhua reported, citing chairman Jiang Jiemin.
“From the company point of view, the opportunities are overseas,” said Chow.
A review of the import data suggests that China has met its needs in the oil market with flexibility to counter the risk of crises, sanctions, and hot spots by juggling deliveries from 42 foreign countries last year.
While it sourced less crude from Iran, China boosted imports from Iraq and Saudi Arabia, for example. A disappointing decline in supplies from Kazakhstan was more than offset by increased deliveries from Russia.
A standoff over exports between Sudan and South Sudan also cut China’s imports from its investments there by some 86 percent last year. But China took advantage of Libya’s renewed role as an oil producer to raise its imports from that country by 181 percent.
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