Oil demand growth to maintain rational level
By Hu Xiao (China Daily)
Updated: 2004-04-26 08:47

China's demand for oil will grow rationally instead of exploding after the over-heated economy cools off, according to China's second-largest oil producer.

Chen Tonghai, president of Sinopec, said China's increasing oil consumption will return to the previous normal rate, given the promotion of sustainable economic development within the nation.

"The over-heating investment in some industries such as steel, aluminium and cement plus sluggish consumption are the key forces behind energy shortages," Chen said at the Boao Forum for Asia, which closed yesterday in Hainan Province.

The problems of haphazard investment and low-level, redundant expansion are worsening in some industries and localities, resulting in excess energy consumption, a serious waste of resources and environmental pollution, he said.

"Fuel supplies to power plants have been increased to meet the emergency," Chen said.

State statistics show that about 500,000 to 700,000 tons of additional fuel products have to be used per month in order to ease the tension.

Chen was referring to the reportedly worst energy shortage in more than a decade. Industrial regions in coastal areas were the first to face shortages - early in the summer of 2003 - which then spread to 21 provinces, covering two-thirds of China.

An irrational economic structure and inefficient macro controls are being blamed for the present shortage.

In 2000 when drafting a new five-year plan for Chinese economic development, policy-makers were expecting a single-digit annual increase in the nation's power demand and wondering whether the output from new stations could be absorbed. As a result, power plant construction was frozen.

But instead of the 5 per cent average annual growth as estimated by the National Development and Reform Commission at the time, power consumption has been growing at an annual rate of about 15 per cent over the past 17 months.

Some emergency measures were taken in response, including increasing the supplies of diesel to power plants.

Since last year, China has been adding new capacity at a frantic rate and continues to do so. The central government approved the construction of more than 40 power stations last year, and got most of them online, adding 30 gigawatts to the capacity. Another 37 gigawatts worth of new power are due to be added this year.

Chen said as the investment in both power plants and grids increases, the demand for diesel in power generation will decline in the next two or three years.

In addition, some world players in the oil market also predict that China will have a "conservative" rather than an "aggressive" energy strategy in the long term.

Describing China as a "late comer" in overseas co-operation in energy, Seyed Mohammad Hosein Adeli, deputy minister of economic affairs of Iran and adviser to the ministry of petroleum, told China Daily that he believes China was seeking "proper options" for its energy strategy.

"Chinese companies are welcomed within Iran's energy sector and we welcome China to explore various ways of co-operation with Iran," he said, adding that the two economies were highly complementary.

"China has a large market and Iran has very rich reserves, so it's very natural for the two states to provide each other with competitive conditions. Its energy strategy does not show aggressive signs."

Observers warned that energy-saving and the search for new, alternative energy sources are vital for China to resolve its energy crunch.

Shen Zhongyuan, senior researcher with the Energy Data and Modelling Centre, indicated in his study that huge energy-saving potential can be found in China's energy transformation, final consumption and primary energy consumption sectors.

The report was released at the end of last year.

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