A researcher at China National Petroleum Corp (CNPC) said Tuesday that fulfilling the China-US phase one trade deal will be difficult. Both sides should renegotiate an energy trade deal so that it benefits each other, he said.
With the global economic downturn and the COVID-19 pandemic, it is difficult for China to expand imports of US energy products based on the phase one trade deal. In response to the challenges, both sides should further assess the terms of the China-US trade deal, according to Dai Jiaquan, director of the Oil Market Research Department at the Economics and Technology Research Institute of CNPC.
He said expanding imports of US energy products should be consistent with the principles of the market economy. As long as US energy products are competitive in the global market, it will be realistic for China to expand imports of US energy products.
After the US nearly achieved its target of energy independence, the US aims to expand its oil and gas exports. China is now the largest importer of crude oil and natural gas worldwide, so it's vital for both sides to review the energy trade deal, Dai noted.
Dai said that China could import crude oil from the US based on Chinese refining capacity, but there are some uncertainties on price due to high transport costs.
Furthermore, it will be difficult to import liquefied natural gas (LNG) and methanol from the US, as they are not cost effective for China due to the high transport costs, said Dai. He added that China is the largest methanol producer and consumer in the world.
There is some space to expand imports of US petroleum coke. The US has been China's largest petroleum coke supplier for a long time, but the trade figure dropped by 50 percent to about 1.8 million tons in 2019 due to trade friction between the two sides. "China is expected to import more than 7 million tons of petroleum coke each year from the US in 2020 and 2021," said Dai.
American ethane is also attractive to the Chinese petrochemical industry. As the US is the top ethane exporter in the world, China can import more US ethane.
Nearly 17 ethane cracker projects for ethylene production are under construction, with a combined capacity of 21.7 million tons annually. Of those, 14 projects with a combined capacity of 19 million tons annually will need to rely on imported ethane, said Dai. He added that while there are limited imports of ethane this year, China will buy an additional 2.3 million tons of ethane from the US in 2021 with more projects being put into production.
Dai expects China will increase imports of propane from the US, as US propane is competitive in pricing compared with that from the Middle East.
Several Chinese PDH (propane dehydrogenation) projects will be put into production in 2020 and 2021, with an additional capacity of 1.32 million tons in 2020, and 1 million tons in 2021. China is expected to import an additional 0.77 million tons of propane in 2020 from the US based on the 2017 level, and an additional 0.91 million tons in 2021, according to Dai.
According to the China-US phase one trade deal, China will buy an additional $52.4 billion worth of US energy products - crude oil, LNG, refined products and coal - in 2020 and 2021, based on the 2017 level.
Editor:Cherie
