China Will Be Pushing up Oil Demand/Prices for Next Six Years
To enhance its energy security, China has been pressing forward with its Strategic Petroleum Reserve plans amid its feverish race to secure oil and gas deals worldwide. In July, the country’s state-run Sinochem Corp. started expanding a facility that will become the country’s largest strategic oil reserve site. The site on Aoshan island, just off the manufacturing hub of Zhejiang province in east China, will eventually hold 50 million barrels, or roughly ten days of China’s current rate of net crude imports, after adding a 19-million-barrel farm to its existing 31-million-barrel base.
This news follows China National Petroleum Corporation’s (CNPC) March disclosure that it had started construction on a SPR facility in Jinzhou City. Both projects are part of eight facilities planned for China’s Strategic Petroleum Reserve Phase Two (SPR II). The Jinzhou site it expected to begin operations by 2015. It is expected to store 3 million cubic meters (18.9 million barrels) of oil, and will cost Chinese Yuan 2.26 billion ($357.4 million), according to Xinhua News Agency.
How this will play out in international oil markets and even geo-politically is already being seen. While it’s no secret that oil price increases in the last ten years are partly due to increased Chinese demand, China’s filling of its oil reserve facilities will take that to the next level, making China an oil shaker and mover on par with the United States. In fact the US, who can influence the price of oil with releases from its massive 700 million barrel reserves, will have even stiffer competition from China who is projected to have 500 million barrels once it completes its SPR facilities by 2020. By then, the world’s number one and number two oil importers will have over a billion barrels of oil in reserve. Added to the mix is a January disclosure by Goldman Sachs that within a year and a half China is due to overtake the US to become the world's largest oil importer.