Petroleum and Gas
Refining Projects Put on Hold
China's State Planning Commission will not approve any oil refining projects until 2000, due to an oversupply of refining capacity. China has a refining capacity of 200 million tons/year, but only 70% of the capacity is utilized. The SPC wants to halt the growth of smaller regional refineries, which are the primary cause of overcapacity. The news does not bode well for foreign oil companies interested in tapping China's market, though JV refining projects that have already been approved will continue as planned. Recently, Amoco and the French firm Elf Aquitane have both abandoned plans to build refineries because of regulatory hurdles. Amoco could not get Beijing to lift restrictions on foreign participation in the refining industry for its proposed Fujian refinery. As a result, the company also had to scrap plans to build 100-200 gas stations because they could not ensure reliable supply. Most foreign projects approved in the industry are for downstream petrochemical production.
South China Morning Post (HK), 12/12/96
China Seeks Development of Coal Gas
A senior Ministry of Coal Industry official said that China will offer preferential treatment for investment in coalbed methane. No compensation fees will be charged for coalbed methane projects, and the government will give priority to loans for key coal gas projects. China is estimated to have some 3.5 billion cubic meters of coal gas resources. So far, state investment and foreign loans have funded 50 coalbed methane projects which utilize 400 million cubic meters of coal gas annually. The United Nations Development Program has provided $10 million to fund three model coal gas projects.
China Economic Information (PRC), 12/31/96
China to Double Natural Gas Output
As one of the country's strategies to develop energy resources, by 2005 China will attempt to double its annual natural gas capacity to 30 billion cubic meters. China is expected to verify additional gas reserves of 1 trillion cubic meters by 2000, according to a senior official with the China National Petroleum Corp. He said that enormous potential exists in gas production.
China Daily (PRC), 01/07/97
Oil Imports Boosted By Economy
As the gulf between domestic petroleum supply and demand of imports continued to widen, imports grew 37.5 percent in 1996. Yang Wenfang, vice president of the China National Chemicals Import and Export Corporation (Sinochem) said that China purchased 22 million tons of crude oil from overseas last year. This compares to the 16 tons bought in 1995, he said. China's robust economic growth is increasingly fueling demand for more oil. He said that demand for energy products like oil, coal, power and natural gas usually equals about half the growth rate of the GDP. In 1996 the GDP grew about 10 percent over 1995. Yang said "Surging demand for finished oil and relatively slow growth in the supply of onshore oil have forced refineries to look to overseas markets." He said that his company intends to import more oil from overseas markets in the next few years. Currently, oil imports account for 12 percent of China's total demand but "the percentage is expected to rise in the coming years," he said. An expert has predicted that China will import 34 million tons of crude oil in 1997, increasing market share to 25 percent. China's shortage will exist for a long time, said CNPC president Wang Tao.
China Daily Business Weekly (PRC), 01/12/97
China Approves New Petroleum Partner
Multinational companies investing in China's petroleum industry will now have another partner to do business with. The China National Star Petroleum Corporation was approved by the State Council on December 7, 1996, to be China's third independent state oil company apart from CNPC and Cnooc. The SPC is now working on the legal ground for Star so it can delineate concession blocks for foreign participation. Foreign investors should expect immediate benefit as Star is preparing to offer acreage in the East China Sea. Star may have conflicting interests with CNPC and Cnooc. To avoid possible problems, the State Council is reinforcing an oil/gas block registration system. Applications for block registration will be evaluated by the National Mineral Resources committee with permits being issued by MGMR. As a registered block it is inaccessible to other crews for at least five years. By 2000, Star is setting a target of 353-447 million tons of new proven and controlled reserves in oil equivalent and an annual production of 4-4.5 million tons in oil equivalent.
China OGP (PRC), 01/15/97
China Star: The Third Oil Company of China
Vice Premier Zou Jiahua announced the establishment of China's third oil company called China Star Petroleum Co. Ltd, on January 24, ending the monopolies of the China National Petroleum Corp. (CNPC) and the China National Offshore Oil Company (CNOOC) in oil exploration and development. China Star is capitalized at U.S. $373 million and has a work force of 31, 000 people. Its main tasks will be to engage in oil/natural gas exploration, development, production in China and abroad; engage in oil/gas sales domestically subject to State management of overall balance; cooperate with foreign enterprises on the block approved by the State with regard to oil/natural gas exploration, development, production; and manage import and exports of equipment, technical surveying, services and contract labor. China Star is the Ministry of Geology and Mineral Resources's attempt to enter China's lucrative oil and gas market and generate badly needed revenues for the Ministry. The company's existence will, however, further intensify the fierce rivalries which already exist between CNPC, CNOOC and other players in the market such as Sinochem.
US Embassy Beijing, The Commercial Service, 02/12/97
Natural Gas Pipeline to Beijing
Beginning September this year, natural gas will be piped from northwest China to Beijing. The project has taken seven years and cost $722.9 million, according to officials in Beijing. By the year 200, approximately 1.08 million Beijing households will be using natural gas, a rise of over 600,000 people. The municipal government of Beijing has decided that all coal burning stoves within the third ring road of Beijing will burn natural gas in four years. Coal used in industrial production will also be decreased.
Cbnet (PRC), 03/17/97
China Puts Halt on Leaded Gasoline
To help reduce pollution, most of China's major cities have decided to discontinue using leaded gasoline. According to sources in related department, Beijing, Shanghai, Tianjin and Guangzhou have already submitted their plans to the State Environment Protection Bureau. About 60 percent of all gasoline used in China in unleaded but unleaded gas should count for 80 percent of the total gas output by 2000. The Ministry of Machine Building Industry has also promoted the development and manufacturing of better converters to reduce the discharge of exhaust by cars.
China Economic Information (PRC), 03/17/97
Expansion of Foreign Oil Firms Threatens Domestic Companies
According to China's official press, domestic engine lubricant makers are being threatened by their foreign counterparts whose high grade production is expanding quickly to meet the increasing demand. Liu Wenrui, an official at domestic leader Great Wall High Quality Lubricating Oil Co said that within two years companies like Mobil Corp, Shell Oil Co., Caltex, British Petroleum and Esso will have total annual capacity of 400,000-600,000 tons. Last year, Chinese producers made only 160,000 tons of high-grade lubricant that is at a competitive level with foreign product. Total domestic output is 2.8 million tons but of an average quality. The report appeared to worry that the foreign dominance of other markets like detergents, cosmetics, film and food be repeated in this sector.
Cbnet (PRC), 04/09/97