Whilst many of the world’s leading economic powers continue to languish in what could perhaps be described as a state of post recession stupor, China has continued to demonstrate quite remarkable economic growth. Recognised as the world’s leading exporter, and frequently referred to as the ‘engine room’ of worldwide recovery, China achieved growth of 9.1% in 2009 in spite of the global downturn. This stellar performance has continued into 2010, with China, whose growth is key to the overall global economic recovery, recording a robust 11.9% in the first quarter. Although in recent months there have been some worrying signs of economic cooling as the Chinese government has eased back on its programme of fiscal stimulus, and indeed July has seen the slowest rate of growth in 17 months, China remains on track to overtake Japan and become the world’s second largest economy before the end of the year.
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From an energy perspective, such relentless economic progress has profound implications. According to the International Energy Agency (IEA), last year saw China leapfrog the US to become the world’s largest energy user, consuming 4% more energy than the US, a total of 2252 billion t of oil equivalent. Extraordinary when you consider that the US consumed twice as much as China as recently as the year 2000.
For the Chinese government, security of energy supply potentially represents its greatest challenge. As China grows it needs more and more oil, year on year, in order to continue its ascendancy. The first five months of 2010 alone saw oil imports rise by 30%. Certainly the pursuit of a stable and long term oil supply solution has shaped much of the country’s foreign policy over recent years. From its much criticised relations with Iran to the establishment of a series of new special relationships throughout the African continent, Central Asia and Latin America, China is building oil supply piece by piece as if part of a giant jigsaw puzzle.
In terms of the development of hydrocarbon processing capacity, China has been no less industrious. Contributing Editor, Nancy Yamaguchi’s article, ‘China: the refining Colossus of Asia’, beginning on page 12 of this month’s issue, provides a detailed overview of the development of China’s considerable downstream infrastructure. From a domestic demand of a mere 1 million bpd in 1994, largely met by small scale so called ‘teapot’ refineries spread around the country, China is now Asia’s largest oil market with a predicted oil product demand of 8.7 million bpd in 2010. Refining capability in China is today highly sophisticated with an overall capacity of 8.2 million bpd and a further 4.1 million bpd expected onstream by 2015.
For now, China commands a unique economic position. Whilst most countries are grappling with sluggish or non-existent growth, China is single handedly reorganising the global economic order. Its appetite for commodities in general and oil in particular is voracious. How it manages this thirst in the long term remains to be seen but its progress to date is impressive.