1 ETRI

China's Oil Demand Outlook

Qian Xingkun

CNPC Economics & Technology Research Institute

2016.09.08 Singapore

2

1. Lower Growth Rate, Intensity and Elasticity of China’s

Oil Demand since 2000

2016.09.08·Singapore 01 ETRI

China’s Oil Consumption Characteristics from 2000

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2. China’s Economic Development Goals in the 13th Five

Year Plan

According to the government's development goals, China will complete

the building of a moderately prosperous society in all respects in 2020,

maintain the economic growth target of 6.5%~7% and accomplish per

capita income exceeding ten thousand dollars.

Basically achieving new industrialization and initally completing the

upgrading of “Industry 2.0” to “Industry 3.0” by 2020; accelerating the

development of the service sector, and expecting the proportion of

service sector in GDP to raise up to at least 55% by 2020.

Carrying out a new type of people-centered urbanization; promoting the

household registration system, residence permit and land transfer regulations;

achieving high quality of urbanization standard, i.e. resident population

urbanizaton rate and registered population urbanization rate reach 60% and 45%

respectively.

Urbaniza-tion

Economic

structure

Economic

growth

2016.09.08·Singapore 02 ETRI

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2. Scenario：China’s Economic Growth in the

“New Normal”

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BAU Scenario

High-growth

Scenario

Low-growth

Scenario

China’s average annual GDP growth rate in 2016-2020 will be 6.5%. By

2020, GDP per capita will exceed US$10,000. New-type industrialization

will be realized, and service sector will account for over 55%, the

proportion of industry sector will decline to 30%. The urbanization rate of

permanent resident population will reach 60%.

With rapidly expanding urbanization, investment will still play a dominant

role in economic growth, real estate maintains high-speed growth, new-

type industry develops fast, urbanization rate is accelerated, rapid

recovery of overseas market will drive fast growth of export. China’s

average annual GDP growth rate in 2016-2020 will be 7.5%.

Transformation of economic structure is failed, China’s economy falls into

‘Middle Income Trap', real estate market bubble breaks, investment

growth rate falls down greatly, income growth slows down, consumption

growth is restrained, and external demand is weakened. China’s average

annual GDP growth rate in 2016-2020 will be 5.5%.

GDP Growth Rate 2013-2015 2016-2020 2021-2025 2026-2030

High-growth 7.4% 7.5% 7% 6%

BAU 7.4% 6.5% 6% 5%

Low-growth 7.4% 5.5% 5% 4%

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3. China’s oil products demand will grow at a lower-middle

speed

The average annual growth rates in 2015-2020 will be 1.4%, 2.9% and 4.2%.

The average annual growth rates in 2020-2030 will be 0.3%, 0.9% and 1.7%.

Scenario Forecast of China's Oil Products Demand (2015-2030)

2016.09.08·Singapore 04

339 349

232

316

364 400

388

460

0

50

100

150

200

250

300

350

400

450

500

2010 2015 2020 2030

millio

n

metr

ic

ton

s

Low-growth case Base case High-growth case

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Gasoline: China’s passenger cars grows rapidly, driving

rapid growth of gasoline demand

Impact Factors:

Passenger Car Population: average annual growth rate of 8%-16% in 2016-2020.

Fuel Saving Technology: average fuel consumption of new passenger cars in 2020 will

be 5.0 L/100km, 30% lower than that in 2014.

The average annual growth rate of China’s gasoline demand in 2015-2020 will be 3.7%,

5.6% and 6.3% respectively.

Scenario Forecast of China’s Gasoline Demand（2015-2030）

2016.09.08·Singapore 05

138

150

69

115

151

173 156

183

0

20

40

60

80

100

120

140

160

180

200

2010 2015 2020 2030

Millio

n m

etr

ic

to

ns

Low-growth case Base case High-growth case

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Diesel: Economic transition will lead to sharp drop of

China’s diesel demand growth

Sectors: transportation, agriculture, industry, construction, residential and others

The average annual growth rate of China’s diesel demand in 2015-2020 will be -0.4%,

0.2% and 1.8% respectively.

80% of diesel demand increment is from transportation sector, while diesel demand

increment in agriculture and construction sectors is small, and industrial diesel demand

will even decrease.

Scenario Forecast of China’s Diesel Demand（2015-2030）

2016.09.08·Singapore 06

170 164 146

173 175 178 190

208

0

50

100

150

200

250

2010 2015 2020 2030

millio

n

metr

ic

ton

s

Low-growth case Base case High-growth case

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Kerosene: Rapid development of civil aviation will boost

fast growth of China’s kerosene demand

Kerosene demand highly relates to aviation turnover, GDP, and per capita income.

China’s kerosene demand is expected to be 31MMt, 38MMt and 42MMt by 2020 under the

low-growth, BAU and high-growth cases respectively. Annual average growth rate in 2015-

2020 will be 2.1%, 6.3% and 8.4% respectively.

Scenario Forecast of China’s Kerosene Demand（2015-2030）

2016.09.08·Singapore 07

31 35

17

28

38

49 42

69

0

10

20

30

40

50

60

70

80

2010 2015 2020 2030

millio

n

metr

ic

ton

s

Low-growth case Base case High-growth case

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Consumption of diesel-gasoline ratio continues to decline

2016.09.08·Singapore 08

2.26 2.26 2.26 2.2 2.23

2.13 2.11 1.97

1.82

1.61 1.5

0

0.5

1

1.5

2

2.5

0

5000

10000

15000

20000

25000

30000

35000

40000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2020 2030

Gasoline consumption Diesel Consumption Diesel-gasoline Ratio

1.16

1.03

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China’s oil products will be in exceed supply in 2020, presenting the

“surplus in the East while shortage in the West” pattern

2016.09.08·Singapore 09

Gasoline

Diesel

kerosene

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4. China’s naphtha demand will grow at a lower-middle

speed

In 2015, China’s ethylene production reached 17.15 MMt (1.1% y-o-y); propylene production was 19.9 MMt

(7.8% y-o-y); naphtha consumption totaled 35 MMt (7.2% y-o-y).

Crude oil price stays low, while the economy of petroleum-base chemical rises again. Domestic naphtha

demand will reach 39MMt and 48MMt in 2020 and 2030 respectively on BAU case, considering the growth

of domestic petroleum-base ethylene output. Its average annual growth rate will be 2.2% and 2.1% in 2015-

2020 and 2020-2030 respectively.

Forecast of China’s Naphtha Demand outlook

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3750

4600

1080

2731

3500 3900

4800 4150

5350

0

1000

2000

3000

4000

5000

6000

2005 2010 2015 2020 2030

Low-growth Case Base Case High-growth Case

20.4% 5.1% 2.2% 2.1%

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5. China’s oil demand will be high but with a lower

growth rate

Forecast of China’s Oil Demand Development Trend

AAGR

Demand Elasticity

Intensity(t/US$10000)

2016.09.08·Singapore 11

5.68 5.85

2.25

3.25

4.41

5.41 6.08

6.8 6.45

7.92

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

9.0

2000 2005 2010 2015 2020 2030

Low-growth Case Base Case High-growth CaseUnit: 100 MMt

7.8% 6.4% 4.2% 2.4% 1.1%

0.79 0.57 0.54 0.37 0.21

1.62 0.93 0.54 0.51 0.5

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6. China’s oil demand will reach the peak of 680MMt around

2030

Comparative analysis: compare and analyze the key factors that impact oil demand

(economic aggregates and structure, population, urbanization, industrialization stage,

alternative energy, etc.). Referring to experiences of developed countries and China's

planning, China's total population and urbanizaton rate will be maximized in 2025-2030, thus

China's oil demand peak will be 800MMt, yet acual demand will be approximately 680MMt.

Model analysis: consider the factors such as GDP, industrial structure, population, energy

consumption per unit from the aspect of demand; use the optimization methods of multiple

regression and stepwise regression. We predict that China's oil demand will reach the peak

of 680 MMt around 2030.

0

1

2

3

4

0 10000 20000 30000 40000 50000Per

cap

ita o

il c

on

su

mp

tio

n

（to

n）

Per capita GDP（US dollar）

United States Germany France

United Kingdom Japan India

GDP and oil consumption per capita of main

countries in recent years

United

States

After the oil crisis in 1970s, population and economy

factors drive oil consumption to rise again; and after 2008,

economic crisis and auto saturation lead to oil

consumption peak again.

Japan

Population aging arose from 1980s, economic and

urbanization development drive oil consumption; Asian

economic crisis occurred in 1990s, and alternative

energy development drives oil consumption to reach

peak volume.

Germany Fast development of diesel cars and improvement of

automobile fuel economy has great impact on oil demand.

Korea Oil demand intensity began to fall after the Asian

economic crisis.

Oil Consumption Peak of Developed Countries

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7. Alternative Energy Will Develop Rapidly, but With Various Prospects

Alternative energy represented by natural gas and electricity will develop more rapidly.

Natural

gas

Methanol

fuel

Ethanol

fuel CTL Biodiesel

Electric

locomotive

Electric

vehicle Total

Substituting volume unit Bcm Mt Mt Mt Mt TWh Mt Mt

2012 (Material Volume) 15.6 4 2 1 1 91 0.03 —

2012 (Substituting

Volume) 12.85 1.8 1.2 1 1 24 0.02 41.87

2015 (Material Volume) 24.4 4 2 1.5 3 106 0.5 —

2015 (Substituting

Volume) 20.1 1.8 1.2 1.5 3 28 0.25 55.85

2020 (Material Volume) 41.3 5 2 5 2 123 5 —

2020 (Substituting

Volume) 34.03 2.25 1.2 5 2 32.5 2.5 79.48

2030 (Material Volume) 63.8 6 2 10 2 150 50 —

2030 (Substituting

Volume) 52.57 2.7 1.2 10 2 40 25 133.5

Forecast of China’s Alternative Energy as Substitutes of Oil

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Conclusion

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The driving force of economy for oil consumption is weakened, oil

demand will keep a low growth of 2%-3%, and external dependence rate

will also increase.

Characteristics of oil consumption demand will be low growth, low

consumption and low pollution.

Demand growth of different oil products continues to be diversified.

Domestic oil products market is loose, and export (especially for diesel) is

becoming large scaled.

Alternative energy represented by natural gas and electricity will develop

more rapidly.

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Thank you！

CNPC Economics & Technology Research Institute (ETRI)