Carnegie Endowment for International Peace - May 6, 2014
Robust industrial growth and increasing domestic living standards have left China with a nearly insatiable thirst for energy. And oil is playing an integral part in meeting that demand.
Although coal remains the chief source of energy, oil fuels China’s transportation, plays a crucial role in industry, and is a significant input in agriculture. During the height of the Cultural Revolution in 1969, China ranked 25th in world oil demand. Today, China is the world’s second-largest consumer of oil and the largest net importer of petroleum and other liquid fuels.
China’s growing demand for oil comes at a time when the petroleum industry is experiencing perhaps the most significant paradigm shift since the OPEC embargo in 1973. High crude prices combined with technological advances are allowing supermajors, petro-states, and independent oil entrepreneurs to unlock a new class of previously unattainable unconventional oils. These oils are globally more abundant and widespread than their conventional predecessors.
Gordon on China's Oil Future
How China navigates this complex new oil terrain will have far-reaching consequences for domestic affairs, international trade, the environment, and global security. With Beijing’s new leadership seeking to ensure that China’s economic growth charts a more sustainable path, it is the right time to address the nation’s future oil opportunities and challenges.
China’s Oil Industry
Until the 1990s, China enjoyed energy self-sufficiency due to the discoveries of the large Daqing field in northern China in the 1950s and other conventional plays in central China. Now, China’s oil consumption exceeds domestic production by more than 2:1, fueling the nation’s search for petroleum at home and abroad. China became a net oil importer in 1993 (see figure 1), and in 2013, it was responsible for one-third of all oil growth. Over the longer term, the U.S. Energy Information Administration projects that China’s output of oil and petroleum products will reach 5.6 million barrels per day by 2040. Most of the growth over the long term is expected to be from unconventional sources, including gas-to-liquids, coal-to-liquids, kerogen, and biofuels, as conventional crude oil production remains relatively flat.