Does China need overseas oil production?

Chinese oil companies are expected to double their overseas crude oil production by 2015, according to the International Energy Agency. China's crude oil overseas production was 1.5 million barrels per day in 2011, it could increase to 3.0 million bpd in 2015.

IEA estimates Chinese firms have spent about 92 billion US dollar to invest in overseas oil field since 2009. The annual investment recorded 35 billion dollars last year and IEA forecasts the steady investment is likely to continue.

China imported average 5 million bpd of crude oil in 2011, so supply from the nation's owning oil field was about 30% of total imports during the year. How will the situation has changed in 2015?

US Energy Information Administration forecasts that China will consume 12.05 million bpd of petroleum in 2015, while its domestic output will be 4.29 million bpd. Therefore, The country will need 7.8 million bpd of imports in the year.

Based on predictions by IEA and EIA, China is expected to produce nearly 40% of its imported crude oil in its owning oil field. The ratio will be far higher than Japan which produces only about 16% of imported crude oil in its own interests.

Although Japan plans to increase its overseas production to 40% of imported crude oil by 2030 as well, Chinese are much more aggressively buying overseas interests.

However, will China need to acquire more overseas crude oil production?
The chart apparently shows steady increase of Chinese petroleum demand over the past several year besides slump in the US and Japan.

Year-on-year growth of oil demand more clearly describes it, but on the other hand the chart suggests Chinese growth is correlated with decrease in the US and Japan. Growth of energy consumption in China was caused by transfering of manufacturers from advanced nations.

Moreover, Chinese manufacturing's deep dependency on exports is causing more direct fluctuation in energy demand in line with the world economy situation than advanced countries.

Since recent increase of manufacturing costs in China and political uncertainty are triggering foreign companies to escape from the country, China should boost its domestic demand to keep steady growth of energy consumption.

However, China's situation seems not to suitable to increase middle-class people and cultivate domestic demand. Its environmental regulations are not succesfully done and rich people are rushing to send money to abroad rather than investing in their own country.

China may begin selling excess its overseas produced crude oil in the future due to the sluggish domestic demand.

Also considered another possiblity. Crude oil fields may become toxic assets in the future because of drastic change in world petroleum supply and demand caused by the shale revolution. China has been very worry about the rapid increase of petroleum dependency on imports over the past several years, so the country seems being fooled investing in the overseas oil field at higher prices....

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