By STEPHANY ROMANOW
HOUSTON -- China continues to be a world leader in demand for oil and fuels, but its evolving economy could drive new changes in which specific energy markets reap the benefits.
These views were expressed by panelists in an IHS CERAWeek 2014 conference session on the global oil market outlook.
K. F. Yan, senior director of global oil for IHS, confirmed that Chinas energy demand will still increase even as its economy decelerates. More importantly, domestic oil production will be stagnant -- thus leaving this nation even more dependent on oil imports.
By 2020, China will import about 480,000 bpd of oil.
This economy is readjusting from a high-growth path, Yan explained, with consumer demand growing for automobiles and appliances.
Changes in fuel demands
Previously, diesel demand dominated Chinas transportation fuels market. A shift in vehicle ownership and usage, however, will move this economy from diesel to gasoline.
Previously, the large government- owned fleet was powered by diesel. But in the change-over, Chinas fleet will be smaller consumer automobiles by private owners who travel less miles. Additionally, the autos and trucks will be more energy efficient.
Meanwhile, China must manage other problems as the middle class automobile ownership rises. Traffic congestion in urban areas and air pollution are problems that must be addressed with better designed vehicles. Transportation fuel substitution could be a solution.
In the future, compressed natural gas (CNG) powered trucks and automobiles will increase, Yan predicts. Chinese manufacturers are currently developing 100% methanol-powered trucks.
Chinas petrochemical industry is also undergoing efficiency and feedstock changes. Previously, about 70% of ethylene capacity used naphtha-based crackers. But future ethylene capacity will be partially naphtha-based and supplemented by LPG.
Coal-based ethylene capacity is also on the rise. With vast coal reserves, China will develop more coal-to-methanol-to-olefin projects to meet petrochemical demands.
Furthermore, propane dehydrogenation (PDH) capacity will be constructed to provide much-needed propylene for downstream industries. Imports of LPG will be needed to these projects.
Yan emphasized that China does not have excess refining capacity. Several new refinery expansion and new projects have been announced, but not all will be built.
Due to crude oil rationing, there is about 2 million bpd (MMbpd) of underutilized refining capacity in China. With more crude oil supplies, China could be an exporter of transportation fuels, especially diesel.
Crude oil sources
The Middle East historically provides most of Chinas crude oil imports. In 2013, 53% of Chinas imports were from this producing region.
By 2020, however, the Former Soviet Union will see its crude exports to China rise to a total of 1.1 MMbpd. This will still lag the Middle East, but the ratio could be closer than it is today.
Overall, by 2020, China will be importing 69% of its oil demand, Yan predicts.
The IHS CERAWeek 2014 conference continues through Friday at the Hilton Americas in downtown Houston.