China is the world’s largest net importer of crude oil, and in recent years, China’s crude oil imports have increasingly come from countries outside the Organization of the Petroleum Exporting Countries (OPEC). While OPEC countries still made up most (57%) of China’s 7.6 million barrels per day (b/d) of crude oil imports in 2016, crude oil from non-OPEC countries made up 65% of the growth in China’s imports between 2012 and 2016. Leading non-OPEC suppliers included Russia (14% of total imports), Oman (9%), and Brazil (5%).
On an average annual basis, China’s crude oil imports increased by 2.2 million b/d between 2012 and 2016, and the non-OPEC countries’ share increased from 34% to 43% over the period. Market shares for China’s top three non-OPEC suppliers (Russia, Oman, and Brazil), all increased over these years. While still comparatively small as a share of China’s crude oil imports, imports from Brazil reached a record high of 0.6 million b/d in December 2016, and imports from the United Kingdom reached a high of 0.2 million b/d in February 2017.
Growth in China’s total crude oil imports in 2016 reflected both lower domestic crude oil production and continued demand growth. After increasing steadily between 2012 and 2015, China’s crude oil production declined significantly in 2016. Total liquids supply in China averaged 4.9 million b/d in 2016, a year-over-year decline of 0.3 million b/d, the largest drop for any non-OPEC country in 2016. U.S. crude oil production fell by more than 0.5 million b/d in 2016, but total liquids declined by less than 0.3 million b/d because other liquids production increased by less than 0.3 million b/d.
Much of Chinese production growth from 2012 through 2015 was driven by more expensive drilling and production techniques, such as enhanced oil recovery (EOR) in older fields. As oil prices declined during 2016, investments in developing new reserves also fell and were not high enough to offset the natural production declines of older fields.
Source: U.S. Energy Information Administration, Short-Term Energy Outlook
China’s demand growth has remained the world’s largest in every year since 2009, increasing 0.4 million b/d in 2016. As China increased its imports to address a growing gap between its domestic production and demand, it surpassed the United States as the world’s largest net importer of total petroleum (crude oil and petroleum products) in 2014. The United States imports more crude oil and exports more crude oil and petroleum products than China.
Other factors contributed to an increase in Chinese crude oil imports. For example, in July 2015, the Chinese government began allowing independent refiners (those not owned by the government) to import crude oil. The independent refiners previously had restrictions on the amount of crude oil they could import and relied on domestic supply and fuel oil as primary feedstocks. Another factor is the Chinese government’s filling of new Strategic Petroleum Reserve sites.
EIA’s latest Short-Term Energy Outlook (STEO) forecasts a 0.3 million b/d increase in China’s total liquid fuels demand in both 2017 and 2018. Absent any domestic production increases, China’s crude oil imports are expected to continue increasing. More information about China’s crude oil imports and various market forces that may suggest continued growth in non-OPEC crude oil imports are available in EIA’s This Week in Petroleum.
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In 2021, the makeup of renewables has also changed drastically. Technologies such as solar and wind are no longer novel, as is the idea of blending vegetable oils into road fuels or switching to electric-based vehicles. Such ideas are now entrenched and are not considered enough to shift the world into a carbon neutral future. The new wave of renewables focus on converting by-products from other carbon-intensive industries into usable fuels. Research into such technologies has been pioneered in universities and start-ups over the past two decades, but the impetus of global climate goals is now seeing an incredible amount of money being poured into them as oil & gas giants seek to rebalance their portfolios away from pure hydrocarbons with a goal of balancing their total carbon emissions in aggregate to zero.
Traditionally, the European players have led this drive. Which is unsurprising, since the EU has been the most driven in this acceleration. But even the US giants are following suit. In the past year, Chevron has poured an incredible amount of cash and effort in pioneering renewables. Its motives might be less than altruistic, shareholders across America have been particularly vocal about driving this transformation but the net results will be positive for all.
Chevron’s recent efforts have focused on biomethane, through a partnership with global waste solutions company Brightmark. The joint venture Brightmark RNG Holdings operations focused on convert cow manure to renewable natural gas, which are then converted into fuel for long-haul trucks, the very kind that criss-cross the vast highways of the US delivering goods from coast to coast. Launched in October 2020, the joint venture was extended and expanded in August, now encompassing 38 biomethane plants in seven US states, with first production set to begin later in 2021. The targeting of livestock waste is particularly crucial: methane emissions from farms is the second-largest contributor to climate change emissions globally. The technology to capture methane from manure (as well as landfills and other waste sites) has existed for years, but has only recently been commercialised to convert methane emissions from decomposition to useful products.
This is an arena that another supermajor – BP – has also made a recent significant investment in. BP signed a 15-year agreement with CleanBay Renewables to purchase the latter’s renewable natural gas (RNG) to be mixed and sold into select US state markets. Beginning with California, which has one of the strictest fuel standards in the US and provides incentives under the Low Carbon Fuel Standard to reduce carbon intensity – CleanBay’s RNG is derived not from cows, but from poultry. Chicken manure, feathers and bedding are all converted into RNG using anaerobic digesters, providing a carbon intensity that is said to be 95% less than the lifecycle greenhouse gas emissions of pure fossil fuels and non-conversion of poultry waste matter. BP also has an agreement with Gevo Inc in Iowa to purchase RNG produced from cow manure, also for sale in California.
But road fuels aren’t the only avenue for large-scale embracing of renewables. It could take to the air, literally. After all, the global commercial airline fleet currently stands at over 25,000 aircraft and is expected to grow to over 35,000 by 2030. All those planes will burn a lot of fuel. With the airline industry embracing the idea of AAF (or Alternative Aviation Fuels), developments into renewable jet fuels have been striking, from traditional bio-sources such as palm or soybean oil to advanced organic matter conversion from agricultural waste and manure. Chevron, again, has signed a landmark deal to advance the commercialisation. Together with Delta Airlines and Google, Chevron will be producing a batch of sustainable aviation fuel at its El Segundo refinery in California. Delta will then use the fuel, with Google providing a cloud-based framework to analyse the data. That data will then allow for a transparent analysis into carbon emissions from the use of sustainable aviation fuel, as benchmark for others to follow. The analysis should be able to confirm whether or not the International Air Transport Association (IATA)’s estimates that renewable jet fuel can reduce lifecycle carbon intensity by up to 80%. And to strengthen the measure, Delta has pledged to replace 10% of its jet fuel with sustainable aviation fuel by 2030.
In a parallel, but no less pioneering lane, France’s TotalEnergies has announced that it is developing a 100% renewable fuel for use in motorsports, using bioethanol sourced from residues produced by the French wine industry (among others) at its Feyzin refinery in Lyon. This, it believes, will reduce the racing sports’ carbon emissions by an immediate 65%. The fuel, named Excellium Racing 100, is set to debut at the next season of the FIA World Endurance Championship, which includes the iconic 24 Hours of Le Mans 2022 race.
But Chevron isn’t done yet. It is also falling back on the long-standing use of vegetable oils blended into US transport fuels by signing a wide-ranging agreement with commodity giant Bunge. Called a ‘farmer-to-fuelling station’ solution, Bunge’s soybean processing facilities in Louisiana and Illinois will be the source of meal and oil that will be converted by Chevron into diesel and jet fuel. With an investment of US$600 million, Chevron will assist Bunge in doubling the combined capacity of both plants by 2024, in line with anticipated increases in the US biofuels blending mandates.
Even ExxonMobil, one of the most reticent of the supermajors to embrace renewables wholesale, is getting in on the action. Its Imperial Oil subsidiary in Canada has announced plans to commercialise renewable diesel at a new facility near Edmonton using plant-based feedstock and hydrogen. The venture does only target the Canadian market – where political will to drive renewable adoption is far higher than in the US – but similar moves have already been adopted by other refiners for the US market, including major investments by Phillips 66 and Valero.
Ultimately, these recent moves are driven out of necessity. This is the way the industry is moving and anyone stubborn enough to ignore it will be left behind. Combined with other major investments driven by European supermajors over the past five years, this wider and wider adoption of renewable can only be better for the planet and, eventually, individual bottom lines. The renewables ball is rolling fast and is only gaining momentum.
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