A drilling platform in Kaiping South Oilfield in the South China Sea in December 2023. [Photo/Xinhua]
China's economic structural transformation and the rapid rise of renewables will make 2024 a turning point for the country's refined oil market, with demand set to shrink for the first time, industry experts say.
Due to the accelerated replacement of traditional energy with renewable sources and economic structural transformation in China, demand for refined oil products is expected to decline for the first time in 2024, except for during the COVID-19 period, as peak consumption was reached earlier than expected, according to the Economics and Technology Research Institute under China National Petroleum Corp.
China's road transport fuel use, including gasoline and diesel, has entered a phase of decline, with total refined oil consumption for the year estimated to be at 394 million metric tons, a 1.3 percent decrease year-on-year, said Li Ran, a senior expert at the institute.
Li expects that by 2030, consumption will drop to between 344 and 310 million tons, a reduction of 12 to 20 percent compared to 2024.
However, given China's ongoing efforts to stabilize and strengthen its domestic economy, Li believes that demand for chemicals is expected to keep growing in the coming years. This growth will further drive demand for chemical products, shifting oil demand as it increases production of clothing, tires, detergents, fertilizers and countless other everyday products.
According to the International Energy Agency, as China's petrochemical sector expands, demand for feedstocks derived from oil is shifting to the country from other long-standing petrochemical centers, significantly affecting global markets for the products made from petrochemicals.
China is driving the global petrochemical industry through a momentous period of transition, with an expansion speed and scale dwarfing any historical precedent, it said.
IEA projections show that global road fuel use is set to decline from 2025. Total oil consumption by advanced economies is already nearly 10 percent below 2007 levels and shows no sign of recovering, even to its 2019 mark. Oil use is also expected to plateau before 2030 in China, long the driving force of rising global demand.
"Under the circumstance, foreign investments, including those from Saudi Aramco, are increasing their focus on China's petrochemical industry," said Fei Huawei, an analyst from the CNPC institute. "On the policy front, China has essentially removed restrictions on foreign investments in the oil and chemical sectors. A stable business environment, a well-established industrial base, and a vast downstream market are attracting global multinational companies to ramp up their investments in China."
Saudi Aramco, for example, has signed strategic cooperation agreements with domestic refining and petrochemical companies such as Rongsheng Petrochemical Co, one of China's refining giants, and Hengli Group Co Ltd, BASF and other multinational companies are also expanding their investments, signaling strong international confidence in China's petrochemical market, he said.
It is expected that by 2030, China's demand for chemical oil will reach 198 million tons, a 30.7 percent increase compared to 2024, he said.
Fei said annual demand for basic chemical raw materials is estimated to reach 169 million tons, a year-on-year increase of 11.1 percent in 2024. Demand for synthetic resins is also expected to grow, reflecting strong market momentum for chemicals in the coming year. According to the institute, significant progress has been made in low-carbon development cooperation.
China Petroleum and Chemical Corp has signed a joint research agreement for a four-party carbon capture and storage cooperation project in East China with Shell, Baosteel and BASF, providing a case study for large-scale domestic CCS projects.
China National Offshore Oil Corporation, along with the Guangdong government, Shell and Exxon Mobil, has signed a memorandum of understanding for a carbon capture, utilization and storage cluster research project in the Daya Bay area, with plans to jointly build China's first large-scale CCUS project in the region.
The projects not only underscore China's leadership in sustainable energy, but also align with global efforts to combat climate change. Successful implementation of CCS could significantly accelerate the decarbonization of key industrial sectors in the region, said Fei.
