China Energy Outlook 2020 - Flipbook - Page 48
sulfur crude oil). China maintains a strategic diversity of dozens of crude oil suppliers to avoid
over-reliance on a single source. In recent years, with the lifting of the U.S. crude oil export ban,
China has begun imports from the U.S., which it overtook in 2017 as the largest crude oil
importer in the world. Although in terms of volume, U.S. crude oil imports are fairly small,
averaging 126,000 b/d from January to July 2019, a level 63% lower than in 2018, imports may
further contract as China imposed an import tariff of 5% on U.S. crude starting in September
2019 (Tan and Zhang, 2019).
Natural gas imports have risen sharply along with demand as domestic production has been
unable to expand commensurately. In 2017, natural gas imports (from both LNG and pipelines)
accounted for 40% of domestic consumption, jumping to 45% in 2018 as the program to reduce
the use of dispersed coal in northern China led to a large increase in demand. China’s primary
source of imported LNG is Australia, with whom it has long-term supply contracts, but it also
buys LNG on the spot market. In 2016, China initiated spot LNG imports from the U.S., and in
2017 accounted for 15% of total U.S. LNG exports. The trade war that begin in 2018
undermined the growth trajectory with the imposition of a 10% tariff in 2018, and in 2019
shipments have fallen sharply as tariffs were further raised to 25% in June. The main source of
pipeline gas is Turkmenistan though the Central Asia-China pipeline via Uzbekistan and
Kazakhstan, which accommodates up to 55 billion cubic meters of flow annually. A new source
of natural gas pipeline imports—the Power of Siberia pipeline from Russia to northeast China—
was completed in March 2019 and is expected to begin deliveries in December 2019.
China’s coal imports are driven less by insufficient domestic production than the geographical
mismatch between coal supply bases in northern China and demand centers in eastern and
southern China that lead to high transport costs. In 2017, China imported coal predominantly
from Australia, Indonesia, Mongolia, and Russia while over 80% of China’s coal exports were to
South Korea and Japan. In 2018, net coal imports, primarily from Australia, Indonesia, and
Mongolia, accounted for just 6% of national coal consumption, but the supplies of lower cost
Australian and Indonesian coal are important to satisfy coal demand in southern China,
particularly in Guangdong.
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