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Fuel Oil Imports Expected to Decrease

Posted on: Monday, 12 December 2005, 18:00 CST

By Wang Ying

Fuel oil imports, which supply more than half of China's domestic oil needs, are expected to fall 14 per cent this year, in contrast with an 18 per cent increase last year.

This is due to the government's macro-controls over the last year to cool down the over-heated economy, as well as the surging oil prices, which are helping to harness the domestic demand for oil, industry insiders yesterday told China Daily.

China, the world's second-biggest energy consumer after the United States, will likely buy some 24 million tons of fuel oil from foreign sellers this year, down from last year's 28 million tons, Gong Jinshuang, a senior analyst for domestic oil market with the China National Petroleum Corp (CNPC), said.

CNPC's Hong Kong-listed subsidiary PetroChina is the country's biggest oil producer and one of the largest suppliers of fuel oil along with Sinopec.

The country's domestic consumption of fuel oil, a kind of refined oil used by utilities and ships to drive turbines, is expected to reach 47 million tons, compared with last year's 49.56 million tons, industry sources said.

"The import decline mainly results from the soaring oil prices over the past year, which adds to the market risks and leaves the country's fuel oil importers cautious about increasing import business," Chen Xilin, chairman of Guangzhou Twinace Petroleum & Chemicals Co Ltd (Twinace), said yesterday.

Chen made the remarks in an exclusive interview with China Daily yesterday on the sidelines of the Economic Development Forum of China's Independent Petroleum Industry, marking the one-year anniversary of the country's first consortium for private oil firms.

Oil-fired power plants, concentrated in South China's Guangdong Province, have been reluctant to continue their business using fuel oil, as fuel oil prices have almost doubled over the past year while the electricity price has been kept at a fixed level by the government.

The FOB (Free On Board) price of fuel oil in Singapore reached US$299 per ton yesterday, up from January's US$171 per ton, Chen said.

Twinace is the country's biggest independent oil company dealing with fuel oil imports. It imported 3 million tons of fuel oil last year, from Japan, South Korea, the United States and Middle East nations. The figure is expected to fall 17 per cent to 2.5 million tons this year.

The biggest consumers of fuel oil are the oil-fuelled power plants, which use more than 30 per cent of the nation's total consumption, with other consumers to include small refineries producing low-quality diesel and the petrochemical producers.

CNPC's Gong attributed the central government's macro policy to slow down the over-heated economy to the fuel oil import decline, saying that the policy has succeeded in reducing the demand for oil products.

Source: China Daily; North American ed.

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