Sunday, January 23, 2011

China - 10.2 million barrels of oil per day and counting

The International Energy Agency recently released its monthly Oil Market Report for December 2010 and it contained some very interesting statistics. 

During the month of November 2010, for the first time, China's oil consumption has risen above 10 million barrels of oil per day (BOPD) reaching a high of 10.2 million BOPD.  Much of the increased consumption was due to the large-scale use of diesel-fueled electrical generation after local governments closed coal-fired plants and rationed electricity to meet central government efficiency and emissions targets.  These measures may have resulted in increased consumption of approximately 200,000 BOPD.  We still have to keep these numbers in perspective; on a per capita basis, China consumes slightly more than one-tenth of the oil that is consumed by the United States at 2.3 barrels of oil per person per year versus 21.8 barrels of oil per person per year.

In the month of November, Asia's overall oil demand rose an amazing 8.3 percent or 1.6 million barrels of oil per day on a year-over-year basis with China's demand growing by 15.1 percent year-over-year.  In the last year, demand grew by 2.7 million BOPD.  Here is a graph showing China's domestic oil demand by quarter:

China's imports were up 17.5 percent year over year to 4.8 million barrels of oil per day, up less than originally predicted because domestic offshore production was 200,000 BOPD higher than expected and reached 4.3 million BOPD in November 2010.  Here is a graph showing China's domestic oil production by quarter:

Here's a graph from the IEA's 2010 World Energy Outlook report showing China's share of the projected global increase in demand for various forms of energy and comparing their contribution to increased demand for the years from 2000 to 2008 to 2008 to 2035:

Notice how China's increased demand for oil imports is projected to reach 84 percent of the world's total increase in oil imports and their increasing demand for oil is projected to reach nearly 60 percent of the total increase in global oil demand between the years of 2008 and 2035.

Here is another analysis of the growth in China's energy requirements.  BP has also done an examination of China’s demand growth between 1990 and 2030 in their Energy Outlook 2030 publication.  Between the present and 2030, they anticipate that China and other non-OECD Asian nations will require an additional 13 million BOPD, accounting for three-quarters of the net global increase in oil demand.  Here are two charts showing projections of China’s increased demand for oil by economic sector and how their liquids demand on a per capita basis is projected to rise.  Once again, note how small their per capita oil demand is compared to other Asian nations:

BP predicts that China’s consumption will rise by 8 million BOPD to 17.5 million BOPD by 2030 and will overtake the United States as the world’s largest oil consumer (the country is already the world’s largest overall energy consumer).  Growth in demand will come from both transportation and industrial needs until 2020 and from transportation needs between 2020 and 2030.  Despite the ramping up of China’s demand for oil, the country only uses oil for about 20 percent of its total fuel needs which is low by historical standards considering the ramping-up of their economy.

As I have stated before, China and other non-OECD Asian nations are already acting to secure their energy futures.  China is providing economic assistance to oil producing nations around the world (particularly Angola as discussed here) and the country’s oil industry is very active in acquisition, exploration and development around the world.  As the peak in oil production is reached (if it hasn’t been already), the competition for the world’s depleting, finite supply of liquid hydrocarbons will intensify.  Since, at this point in time, the world’s economy is addicted to oil, we have to face the fact that unless we move with deliberation toward alternative sources of energy (without even mentioning the environmental impact of continuing our dependency on fossil fuels), this competition will likely lead to military action as nations move to secure their energy futures.   It is obvious that China is rapidly becoming a very large piece of this puzzle and that their impact on the world's energy will continue to grow in the coming decades.  Both of the scenarios referenced in this posting assume that world oil production will continue to grow and that the demand for oil by OECD nations will drop.  What if that doesn't happen?

As an aside, by the end of 2011, China is expected to possess the ability to store 281 million barrels of oil in reserve, equal to 60 days of imports.  China began its program of strategic oil reserve storage in December 2007 when it set up the China National Petroleum Reserve Centre.  The first phase of construction was completed in 2008 and had a storage capacity of 14 million tons.  The second phase of construction commenced in September 2010 and the third phase will be completed by 2020 when China will have the ability to store nearly 600 million barrels of oil, a four month supply.  The Reserve will assist China’s economy by sheltering the country’s industries from rapid price increases.


  1. You wouldn't like to join a party and run for the top job, would you?

    Because you clearly can see past your nose, and not only that, you can explain/show the coming storm in a relatively understandable way.

    Although, maybe if you were restricted to five-second sound bites you'd have the same problem as the rest of them.

    Thanks for this. It shows China, at any rate, can also see past their nose and is doing something about it.

  2. Thanks Jenn. You're right, I could never swallow party line talking points. I'd be relegated to sitting somewhere WAY in the back of the room.

  3. I agree that oil has no where to go but up.

    However, oil has a tail with a stinger in it. As oil rises in prices and Natural Gas continues to lag SPECTACULARLY energy users world wide are going to be looking at substituting gas where ever possible. In addition, IF any Government mandated that all new cars had to be electric/hybrid that would have a massive effect.

    Despite all that - oil is going to get painfully expensive for consumers - deliciously expensive for investors. For people like me that are both consumer and investor - well - I'll have a double scotch (single malt) continue to invest in Suncor (and others) and buy a hybrid.

    Win - win!

  4. Employment opportunities for horizontal drilling in Oklahoma is massive. Oklahoma is all about oil and natural gas. Unemployment rate is way below than national average, and it’s because of this industry. Nearly one-quarter of all jobs in Oklahoma are tied to the energy industry. A recent research of the Oklahoma Energy Resources Board shows us the oil and gas industry was responsible for pouring more then $51 million into the state's economy and created jobs for over 300,000 people.