ALGIERS, 10 February 2004 — OPEC oil ministers gathering here for a meeting today are looking more and more to China, which has become the second-biggest oil consumer in the world, to sell their crude.
The Organization of Petroleum Exporting Countries “is re-evaluting its markets,” said a dealer at the Rothschild bank in London.
“China, whose hydrocarbon needs are going to grow 15 percent per year in the coming years, is becoming a privileged partner,” the dealer said.
Last year China consumed 5.46 million barrels per day to fuel its rocketing economic growth of 9.1 percent, making the country the second-biggest oil consumer in the world after the United States with 20 million bpd and ahead of Japan at 5.43 million bpd, recent estimates by the Paris-based International Energy Agency (IEA) show.
In the fourth quarter 2003, surging Chinese demand was the main driver of world demand, the IEA said. According to Chinese customs data, crude imports jumped by 31 percent to 91 million tons.
Although China’s oil demand lags far behind that of the United States, analysts are becoming concerned about its impact on the market. “Growth in Chinese demand risks creating tensions on the market; OPEC is already producing at full capacity”, said Morgan Stanley analyst Irene Himona.
According to the IEA, the cartel overshot its official production quotas of 24.5 million bpd by 1.5 million bpd in December.
Algerian Energy Minister Chakib Khelil recently doubted that OPEC was incapable of easily increasing its production even if it wanted. “In order to supply its ‘industrial revolution’, China has started to diversify its hydrocarbon sources,” Himona said.
Chinese President Hu Jintao last week wrapped up a visit to Algeria, Egypt and Gabon with an eye to secure supply for his country’s booming oil demand. During the trip, Beijing and Algiers signed a framework agreement to develop trade, especially in energy.
Algeria recently asked OPEC, of which it is a member, for permission to raise its production by 1.5 million bpd in the coming years. Algeria’s current quota is 782,000 bpd, but production is thought to exceed one million bpd.
Sinopec, the second-biggest Chinese oil company, has been developing a field in the Algerian Sahara while the China National Oil Development Company is going to build an oil refinery near Adrar, which is also in the Sahara. The China National Petroleum Corporation (CNPC) signed a contract last year worth $350 million with Sonatrach, the state-owned Algerian oil company, to import oil from Algeria.
China also signed an agreement with Total Gabon, guaranteeing annual deliveries of a million tons of oil per year. Last week, CNPC signed an agreement with Russian oil group Yukos for the delivery of 10 million tons per year.
The contract follows an agreement signed in March between the companies to bring six million tons of Russian oil to China between 2003 and 2006. “By 2030, Chinese imports should exceed 10 million tons per year,” said Francis Perrin, of the specialist French journal Petrole et Gaz arabes. “These imports should cover 80 percent of the country’s domestic demand,” he added.