This week, worldwide offshore rig utilization made its largest jump in over a year, rising nearly 1% as five idle rigs started new contracts in the past 7 days. This has pushed overall offshore utilization above 84% for the first time since last summer.
With Chinese President Hu Jintao visiting the United States this week, the topic of China's oil consumption is on the minds of many within the United States and around the globe. For the past several years, Chinese demand has been a primary motivator of increased worldwide oil cosumption that has lead to record high oil prices.
Chinese Oil Consumption
For the year of 2006, the Chinese National Development and Reform Commission estimates that China will consume about 6.6 million bpd, of which about 2.9 million bpd will be imported. Currently, about 50% of those imports come from the Middle East, with Saudi Arabia being China's leading supplier of oil imports.
Chinese Oil Production
About 85% of Chinese production is located onshore, with the lion's share coming from the aging Daqing field in northeast China. In recent years, the government has been focusing more on offshore exploration and production, primarily in the shallow waters of the Bohai Bay with its estimated 1.5 billion barrels of oil. CNOOC is responsible for most offshore oil exploration and production in Chinese waters, accounting for nearly all offshore production and more than 10% of the country's total daily oil production.
CNOOC currently has 9 offshore rigs under contract from China Oilfield Services Ltd (COSL), including 8 jackups and 1 semisub. The company also has one other COSL jackup under contract through a subsidiary in Indonesia.
COSL is the leading drilling contractor with rigs working in Chinese waters. It currently has 13 offshore rigs in China, including 12 jackups and 1 semisub. In addition to the 9 rigs under contract to CNOOC, COSL has 2 jackups under contract to Kerr McGee, which are working in Bohai Bay. Kerr McGee is the only foreign company with rigs working offshore China at this time, and the company looks to continue its work with the Chinese in a deepwater concession in the South China Sea.
Chinese Oil Reserves
In addition, to it's proved reserves, the US Energy Information Administration estimates China's future reserve growth at 19.6 billion barrels. Add to that the EIA's estimate of an additional 14.6 billion in undiscovered reserves, and China's total reserves moves up to 52.5 billion barrels. Still a very small number for the world's most populous and quickly growing country.
Chinese Oil Import Growth
Looking back less than 4 years to 2002, Chinese oil imports have more than doubled from about 1.4 million bpd in that short time.
Over the last 3 years, China's economy has officially grown at a rate of 9.5 to 10% for 8 out of 12 quarters, and that trend has continued even higher for the first quarter of 2006 with growth pegged at 10.2% for the quarter. That meteoric growth is fueling increased demand for oil, which the Chinese government has predicted will grow about 4% per year until at least 2020.
Looking forward 10 years, Chinese oil demand will likely be about 9.8 million bpd in 2016, of which about 6 million bpd would likely be supplied by imports. That is a further 100% increase in oil imports in just 10 years.
With its relatively limited petroleum resources, China's economic growth will force it into ever greater dependence on foreign oil supplies. In order to better secure those supplies, China will likely continue to form strategic partnerships with leading oil producers such as Saudi Arabia while also continuing to invest in and acquire foreign oil assets at an increasing pace.
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