China's oil demand to slow in 2015

Slowdown hits natural gas use

The growth of natural gas consumption fell to a 10-year low of 8.9 percent last year from 17.4 percent in 2013, a result of the nation's economic slowdown, an industry think tank said on Wednesday.

Consumption was far below expectations at 183 billion cubic meters, said Sun Xiansheng, head of the CNPC Economic and Technology Research Institute. It estimated that natural gas demand will be about 200 billion cu m this year with imports of 65 billion cu m.

In 2014, China imported 59 billion cu m of natural gas, up 11.5 percent year-on-year, which means that about 32.2 percent of gas demand was satisfied by imports.

Domestic output was 125.6 billion cu m last year, and output of coal gas was only 1 billion cu m, which was far below the target, Sun said.

"There are many reasons for slower natural gas consumption," said Shan Weiguo, an analyst at the institute. The main one was the economic slowdown, which cut industrial use.

Also, the authorities hiked natural gas prices in 2014, which increased the costs of the transport and power sectors and prompted them to conserve supplies, Shan said.

Refiners asked to store more crude

China's top economic planner has, for the first time, set a minimum level of national crude reserves for domestic oil companies, in a move to increase the country's energy security in light of its increasing reliance on imports.

Crude oil stockpiles should be increased to a level able to sustain no less than 15 days of processing volume, according to a statement on new guidelines posted on the National Development and Reform Commission's website on Wednesday.

China's oil demand has continued to increase year-on-year, as has its dependence on imports, according to the statement, but a potential gap in supplies still exists.

"The falling oil prices mean excellent timing for the launch of the new guidelines," said Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

Lin said industrial observers have long been proposing such guidelines and added the well-timed announcement will benefit the oil companies, given the dramatic slump in prices.

The guidelines also said companies can lower their stocks to no less than 10 days of reserves if the international oil price exceeds $130 per barrel. Existing oil processing companies and newly launched enterprises should reach the minimum standard for stocks within one year, while some established producers are being allowed to reach the requirement within three years.

Companies failing to implement the minimum stock requirements or build storage capacity or report false figures will be punished, said the regulator.