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Together with its strong economic growth, China's demand for energy is surging rapidly. The US Energy Information Administration (EIA) forecasts that China's oil consumption will increase by almost half a million barrels per day in 2007, or 38 percent of the total growth in world oil demand. In 2003, China raced past Japan to become the world's second biggest consumer of petroleum products after the US. In 2004, its thirst for oil grew by 15%, while its output only rose 2%. China accounted for 40% of the growth in oil demand over the last four years, says EIA.

According to Oil & Gas Journal (OGJ), China had 18.3 billion barrels of proven oil reserves as of January 2006, flat from the previous year. China produced 3.8 million barrels per day (Mmbbl/d) of oil in 2006, slightly higher than the previous year. Of this, 96 percent is expected to be crude oil. EIA estimates that China consumed 7.4 Mmbbl/d of oil in 2006, representing nearly a half million barrels per day increase from 2005. EIA also forecasts that China's increase in oil demand will represent 38 percent of the world total increase in demand.

Much attention has been given to China's national oil companies investing in oil exploration and production assets overseas. The China National Petroleum Corporation (CNPC) and the China Petroleum and Chemical Corporation (Sinopec) have looked overseas for oil exploration and production opportunities. However, their total contribution to Chinese oil imports in mid-2005 was less than 300,000 bbl/d, or 8.5 percent of total oil imports. As a result, China is expected to continue to rely on imports of oil and petroleum products.

In 1993, China became a net importer of energy resources, with yearly petroleum import increasing around 10m tons and the amount tending to grow on an annual basis. On December 11, 2006, China opened its product oil market. By 2010, China's demand for gasoline, kerosene and diesel oil is expected to hit 185 million to 189 million tons, In 2005 its petroleum imports hit 100m tons, and by 2020 it is expected that over 50 percent petroleum supply would depend on imports.

Despite efforts to accelerate the exploitation and utilization of renewable energy, China will still be short of 8 percent energy by 2010 and about 24 percent by 2040, of which petroleum shortage may reach several hundred million tons. Dependence on imports had jumped from 6.6 percent in 1995 to 25 percent in 2000. The figure is expected to rise to 30 percent by 2010 and further to top 50 percent by 2020. By 2020 over 50 percent petroleum supply would depend on imports.