Current Situation and Forecasting of China’s Crude Oil Market

China Petroleum and Chemical Industry Federation Current Situation and Forecasting of China’s Crude Oil Market Zhu Fang Director/Research Fellow Information & Marketing Department China Petroleum and Chemical Industry Federation May 25th. 2017, Shanghai

I Consumption growth-driven China’s crude oil market III Forecasting of China’s crude oil market II Gradually improved industrial structure layout China Petroleum and Chemical Industry Federation Contents www.cpcia.org.cn

China Petroleum and Chemical Industry Federation I. Consumption growth-driven China’s crude oil market • China’s crude oil production & consumption in 2016 • Annual crude oil processing volume: 541 million tons, with a year-on-year growth of 2.8% • Crude oil apparent consumption: 577.8 million tons, with a year-on-year growth of 5.6% • Domestic crude oil output: 199.7 million tons, with a year-on-year decrease of 6.9% • Crude oil import: 381 million tons, up 13.6%; Crude oil export: 2.9 million tons, up 2.6%; Crude oil net import: 378.1 million tons. www.cpcia.org.cn

China Petroleum and Chemical Industry Federation I. Consumption growth-driven China’s crude oil market Unit: 100 million tons Crude oil quarterly consumption trend in China since 2009 www.cpcia.org.cn

China Petroleum and Chemical Industry Federation I. Consumption growth-driven China’s crude oil market • Steady growth of China’s economy provides the most critical support to the consumption growth of crude oil. Quarter changing trends in China’s GDP since 2012 China’s macro economy has shift gear to a new normal growth since the first quarter of 2012. www.cpcia.org.cn

China Petroleum and Chemical Industry Federation I. Consumption growth-driven China’s crude oil market Main operation incomes and changing trend of petroleum and chemical Industry since 2003 Main operation income (Unit: RMB 100 million yuan) Year-on-year increase/decrease (Right-axis) www.cpcia.org.cn

China Petroleum and Chemical Industry Federation I. Consumption growth-driven China’s crude oil market Consumption trend of petroleum product, gasoline and diesel oil since 2009 Petroleum products, gasoline, diesel oil, Index (Petroleum product) Index (gasoline) Index (diesel oil) www.cpcia.org.cn

China Petroleum and Chemical Industry Federation II. Gradually improved industrial structure layout Import sources of crude oil in 2016 Crude oil output by province in 2016 -2016 -2015 -Accumulated growth (%) Crude oil imported from 47 countries 原油进口来自47个国家 www.cpcia.org.cn

China Petroleum and Chemical Industry Federation II. Gradually improved industrial structure layout • Local independent refinery plants have been granted the use-right of imported crude oil since 2015. Outdated industrial capacity has been eliminated by 58.08 million tons in 2016, resulting in a statistical capacity of crude oil processing up to 804 million tons.。 Domestic crude oil processing volume by provinces in 2016 -2016 -2015 -Accumulated growth (%) Year-on-year growth% Unit:10,000tons www.cpcia.org.cn

Major oil producing provinces in 2016 -2016 -2015 二、布局逐渐完善的产业结构 Heilongjiang Shanxi Tianjin Shandong Guangdong Liaoning Jilin Hebei Henan 354 million tons by sea 陆路0.26亿吨海上3.54亿吨 26 million tons by land www.cpcia.org.cn

China Petroleum and Chemical Industry Federation III. Forecasting of China’s crude oil market • Forecast 1: China’s crude oil consumption will continue to maintain steady growth. • Output and consumption of petrochemical down-stream products will sustain growth. • Rate of capacity utilization will be improved to some extent. In 2016, the average rate of capacity utilization for 25 major products under the monitoring of CPCIF is increased by 1.1% compared with the previous year, realizing a moderate but stable and sound growth. www.cpcia.org.cn www.cpcia.org.cn

China Petroleum and Chemical Industry Federation III. Forecasting of China’s crude oil market • Forecast 2: Volatility in crude oil prices will smoothly transmitted to the down-stream in China. CPI and PPI trends since 2010 -CPI -PPI - Difference value www.cpcia.org.cn

能源化工的发展重点是现代煤化工，属于煤炭清洁转化能源化工的发展重点是现代煤化工，属于煤炭清洁转化 FT合成合成油硫磺回收甲醇合成甲醇下游MTO、MTP 煤炭煤气化变换净化氨合成氮肥甲烷合成煤制天然气空分 X…… 混合醇、乙醇、IGCC等 China Petroleum and Chemical Industry Federation III. Forecasting of China’s crude oil market • Forecast 3: China’s modern coal chemical industry will restrain the growth in crude oil needs. The development of energy chemical sector will focus on the modernization of coal chemical processing, or clean conversion of coal. Synthetic oil Down-stream products of methyl alcohol: MTO, MTP and nitrogenous fertilizer Coal gas mixed alcohols, ethyl alcohol and IGCC FT synthesis Sulfur recycling Methanol synthesis Conversion & Purification Coal gasification Coal Ammonia synthesis Methane synthesis Air separation www.cpcia.org.cn

China Petroleum and Chemical Industry Federation III. Forecasting of China’s crude oil market • Forecast 4: Changes in China’s primary energy consumption structure will impact the consumption of crude oil in China. • Shale gas, shale oil • Natural gas • Green and renewable energy sources • Others www.cpcia.org.cn

China Petroleum and Chemical Industry Federation III. Forecasting of China’s crude oil market • Forecast 5: Domestic industrial structure will enter into a rebalancing stage due to the market access granted to non-state oil refinery enterprises and loosening control on import and export trade. www.cpcia.org.cn

China Petroleum and Chemical Industry Federation III. Forecasting of China’s crude oil market • Forecast 6: Rapid development of new energy automobile in the down-stream will bring about a new uncertain impact on the needs of petroleum products. www.cpcia.org.cn

China Petroleum and Chemical Industry Federation Summary • Along with the stable and sustained development of China’s economy, crude oil still will be the important energy source and raw materials source of the country for a long time. Crude oil consumption and pricing will continue to impact the economic development of China’s petroleum and chemical industry in an extended period. Any other energy sources such as coal, lightweight materials or new energy will, grow to exert a long-time progressive influence, but cannot replace crude oil in short time. www.cpcia.org.cn

China Petroleum and Chemical Industry Federation Thank you for your attention! Contact info: E-mail: zhuf@cpcia.org.cn

Current Situation and Forecasting of China’s Crude Oil Market