The China Petroleum Enterprise Association recently released the Blue Paper of China Oil and Gas Industry Development Analysis and Prospect Report (2018-2019) in Beijing. The Blue Book shows that in 2018, China’s oil enterprises’overseas oil and gas rights and interests output exceeded 200 million tons, reaching 201 million tons of oil equivalent. Meanwhile, China’s oil and gas external dependence has reached a double high level, with oil external dependence approaching 70% and natural gas external dependence rising to 45.3%.
China’s overseas oil and gas rights and interests output exceeded 200 million tons
The Blue Book points out that in 2018, China’s oil enterprises’overseas oil and gas rights and interests output exceeded 200 million tons, reaching 201 million tons of oil equivalent, an increase of 3.7% over 2017, including 160 million tons of equity crude oil and 50 billion cubic meters of equity natural gas.
While making great strides in overseas oil and gas business, the three major state-owned oil companies have actively implemented asset optimization strategies, shifting their focus of operation from more focus on scale development to more focus on efficiency. It is not only the diversification of investment fields, but also the diversification of China’s overseas oil and gas investment. The pace of “going out” of private enterprises is gradually accelerating. The data show that there are more than 30 oil and gas enterprises in China, and more than 200 oil and gas projects in more than 50 countries in the Middle East, the Americas, Central Asia and Africa. While promoting the economic and social development of countries along the lines, they also effectively guarantee China’s energy supply security.
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In 2018, China’s petroleum enterprises continued to deepen oil and gas cooperation. Large-scale projects such as Kazakhstan’s Kashagan Oilfield, Brazil’s Ribera Oilfield and Yamal LNG in Russia progressed smoothly. They successfully acquired Abu Dhabi’s oil assets, won bids for oil fields in Iraq, Brazil and other countries, signed LNG supply orders with Qatar, and completed modernization and upgrading of two refineries in Kazakhstan. We will soon build the East Sino-Russian Natural Gas Line.
Oil and Gas External Dependence
According to the Blue Book, crude oil processing capacity and apparent oil consumption exceeded 600 million tons, oil dependence was close to 70%, natural gas consumption continued to grow strongly, and external dependence rose to 45.3%.
In 2018, China’s apparent oil consumption reached 648 million tons, an increase of 6.95% over the previous year; domestic crude oil production declined for the third consecutive year to 189 million tons, a decrease of 1.3% compared with the previous year, a decrease of 1.9 percentage points; crude oil processing reached 606 million tons, an increase of 67% compared with the previous year; refined oil production reached 360 million tons, an increase of 36% and net export of refined oil re-innovated. It reached 46.08 million tons, an increase of 12.8% compared with the previous year.
In 2018, China’s natural gas consumption continued to maintain strong growth. After China became the world’s largest importer of crude oil in 2017, it surpassed Japan in 2018 and became the world’s largest importer of natural gas. The net import of crude oil reached 460 million tons in the whole year, an increase of 10.9% compared with the previous year, and the dependence on oil increased to 69.8%. The import of natural gas reached 90.385 million tons, an increase of 31.9% compared with the previous year, and the dependence on oil increased to 45.3%. It is estimated that in 2019, China will import 143 billion cubic meters of natural gas and increase its dependence on natural gas to 46.4%.
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In the downstream area, in 2018, China’s new refining energy expansion momentum is strong, the speed and extent of backward capacity elimination is not as expected, the crude oil processing capacity increased by 22.25 million tons per year, exceeding 50% of the global net increase capacity, the total refining energy increased to 830 million tons per year, and the average operating rate of national refineries was 72.9%, the lowest in the world. It is expected that in 2019, with the successive production of large-scale local private refining and chemical projects, China’s crude oil processing capacity will increase by 32 million tons per year and its surplus capacity will reach 120 million tons per year.
The Game of Global Oil and Gas Order Reconstruction enters a new stage
Influenced by supply and demand changes in the world oil market and geopolitical tensions, international oil prices show a slow upward trend. According to the Blue Book, the momentum of world economic growth has weakened, the game of restructuring the global oil and gas order has entered a new stage, and the international oil price has shown a broad fluctuating trend.
In 2018, the growth rate of world GDP was 3.7% in terms of purchasing power parity (PPP) and 3.2% in terms of market exchange rate. The growth rate was the same as that of the previous year, but the momentum of growth began to weaken and the possibility of future downward growth increased. Brent and WTI crude oil futures averaged 71.69 US dollars per barrel and 64.90 US dollars per barrel, up 31% and 27.6% year-on-year respectively, driving the overall recovery of the oil and gas industry. In 2018, the United States became the world’s largest producer of oil and gas. With the rapid growth of oil and gas exports, its influence on the global oil and gas market has increased significantly.
In 2018, the world oil and gas market as a whole showed a recovery trend, with investment in exploration and development increased by 5% to 472 billion US dollars, global oil supply increased to 99 million barrels per day, oil consumption increased by 1.58% compared with the same period last year, global oil and gas production increased by 1.7% and 4.5% respectively, compared with the previous year, and oil and gas production in North America increased by 1.7% and 4.5% respectively. Compared with the previous year, it increased by 12.6% and 9.1% respectively, which is the main area of oil and gas production growth in the world.
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In 2018, global natural gas consumption was 3.86 trillion cubic meters, up 5.3% from the previous year, 2.3 times the average growth rate in the past five years. Global trade in natural gas is 1.21 trillion cubic meters, an increase of 7.1% compared with the previous year, of which LNG trade is 326 million tons, an increase of 9% compared with the previous year, twice the increase of pipeline gas. LNG exports in the United States totaled 21.15 million tons, up 63% year-on-year. With the rapid growth of LNG spot market, the process of natural gas market globalization is accelerating, and consumers are more selective.
The Blue Book predicts that in 2018, the competition pattern of world petroleum refining industry will further deepen, the refining capacity in Asia will decline, the profits in European refining market will be low, and the start-up rate and processing capacity of American refineries will increase slightly. Looking forward to 2019, the downward pressure of international oil prices is great, global demand for LNG is increasing day by day, spot LNG prices will continue to climb, the expansion rate of world refining capacity will slow down, and the industrial center will continue to move eastward.
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