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If this is the case, then there will be even Domestic production averaged 3.92mn bpd
more incentive than ever for the country to in January-August, its highest level since the
boost upstream investment in the pursuit of 4mn bpd average set in 2016. However, imports
energy security. in the first eight months of this year have aver-
aged 11.13mn bpd, up from 2019’s 10.17mn bpd.
Demand bounces back China is eager to close this gap, with President
Chinese fuel consumption had already bounced Xi Jinping having order the country’s oil giants in
back to 2019 levels in May, the head of Unipec’s 2018 to boost production and bolster domestic
research and strategy department, Fairy Wang energy security. The Big Three have made some
Pei, told an industry event this week. strides in this direction, but are still far from
Pei said surging purchases of mixed aromat- delivering a profound uptick in production.
ics and light-cycle oil (LCO) this year suggested
that Chinese demand was likely stronger than What next
official crude import data suggests. It is against this backdrop that the Chinese gov-
Pei said mixed aromatic imports had doubled ernment is seeking not only to sharpen the state
on an annual basis in the first seven months this major’s upstream focus by removing responsi-
year, while LCO purchases had risen by 115% bility for the midstream, but also by striving to
and cutback asphalt shipments had surged bolster private sector participation.
almost 800%. Boosting private investment is an under-
“China’s oil demand has recovered at a very standable objective, if somewhat of a challenge
fast rate,” Bloomberg quoted her as saying, to achieve in any meaningful way given the cur-
while also citing the National Development and rent climate.
Reform Commission (NDRC) data as showing Foreign investors will be watching closely the
that oil demand fell 3.5% year on year lower in deteriorating Sino-US relationship, searching for
January-July. signs of how it will evolve. Investment between
The NDRC’s data supports industry observa- the two countries fell by 16.2% y/y in the first half
tions that surging crude oil imports were sim- to $10.9bn, underscoring the countries’ troubled
ply the result of opportunistic buying. China trade dynamic.
imported a record 12.99mn barrels per day in China also has a distinct lack of major pri-
June, followed by 12.13mn bpd in July – the sec- vately owned upstream domestic players to take
ond highest figure on record. While purchases up the slack. This means that there is no clear
dropped to 11.22mn bpd in August, this was still evidence to suggest that a surge of private invest-
the fourth-highest figure on record, after May’s ment in the upstream is on the horizon. Rather,
11.72mn bpd. China is more likely to have to build its private
Pei’s observations that Chinese demand is domestic industry from the ground up and it will
more robust than widely believed will be wel- be years before this will contribute in a meaning-
come news for the global oil market, which has ful way to national energy output.
been counting on the world’s largest importer to The central government has picked a most
soak up excess supply and support oil prices. It is unfortunate year to seek to woo foreign and pri-
not such good news for China’s energy planners, vate investment in oil and gas assets, and this will
who are deeply concerned by the country’s per- likely have long-term implications in the coun-
petually expanding import dependency. try’s energy security outlook.™

Week 37 17•September•2020 www. NEWSBASE .com P9