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BEIJING - With tensions rising between Western countries and Iran and geo-political risks increasing, it's time for China to further diversify its crude oil import sources, industry experts said.
The European Union (EU) reached a preliminary agreement to impose sanctions against Iranian oil exports, Reuters reported, a move that drove Brent crude oil prices higher. A final decision on sanctions is expected by the end of this month.
Sanctions against Iran would inevitably affect China, which would probably reduce its reliance on that nation due to political pressure, said Niu Li, a senior economist with the State Information Center.
Iran, which is China's third-biggest crude source after Saudi Arabia and Angola, exported 420,000 barrels of oil a day to China in 2010, supplying 9 percent of China's total imports, according to the Economics & Technology Research Institute of China National Petroleum Corp (CNPC).
Iran is the second-biggest oil producer in the Organization of Petroleum Exporting Countries. Its estimated oil output is about 3.6 million barrels a day, according to a research note from Standard Bank of South Africa Ltd.
China spent $15.85 billion buying oil from Iran in the first nine months of 2011, up 84.5 percent year-on-year. Oil imports from Saudi Arabia increased just 19.7 percent, while those from Angola rose 0.28 percent, Chinese customs data show.
China's State-owned oil companies, including CNPC, China Petrochemical Corp and China National Offshore Oil Corp, recently slowed the pace of their investment in Iran, reflecting concerns about the uncertain situation, said Song Zhichen, an analyst at China Investment Consulting.
"Their investment in the country may further slide if the situation gets worse when war risks grow," Song said.
Thus, it's important for China to expand its crude oil sources to ward off increasing risks in the area, Niu said.
Apart from Iran, China also imports oil from Qatar, the United Arab Emirates, Russia, Venezuela and some African countries.
Customs figures show that China, the world's second-biggest oil user after the US, imported 231.86 million tons of oil in the first 11 months of 2011, up 6.1 percent year-on-year.
Imports accounted for more than 50 percent of the country's total oil consumption starting in 2010.
In response to possible EU sanctions, an official from the National Iranian Oil Co was quoted by Reuters as saying that the country could replace its European customers by diverting more oil into Asian countries, including China, as well as Africa.
China might get bargain oil prices from Iran if the Middle Eastern country, which is heavily reliant on oil exports, is forced to seek alternative markets to replace the US and EU, said Yin Dongqing, a researcher at CNPC's Economics and Technology Research Institute.
But he added that to guarantee China's energy security, it would be important to accelerate the construction of more strategic and commercial crude oil inventories, even though there's little chance that a war in Iran will break out.
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