Oh Boy, They're Going To Take All The Oil Too...........
China begins expanding its supertanker fleet
By David Lague
Wednesday, May 16, 2007
SHANGHAI: China has begun an ambitious effort to build a fleet of more than 90 supertankers to improve its control over oil imports which are vital to sustaining a booming economy, shipping industry experts say.
Government strategic planners in Beijing have set a target that half of the oil imports should be carried on Chinese-owned tankers. No deadline has been set to meet this goal, but Chinese shipping companies are expected to order as many as 65 supertankers, worth an estimated $7.1 billion, by 2012, according to transport analysts.
The move by China is seen as an attempt to gain more control over its energy supply.
"It is all about national energy security," said Yang Baohe, principal naval architect at the Marine Design & Research Institute of China in Shanghai, a subsidiary of the sprawling China State Shipbuilding Corp. "We have to be able to use our own ships to transport oil."
These ships, in addition to the existing Chinese fleet of 25 supertankers, would have the capacity to deliver about half of projected imports by about 2015.
A tanker fleet of that size would not put China in the same league as Japan, Norway or Greece, but it would be a sharp improvement in its oil shipment capacity.
Maritime security analysts say that one of the greatest Chinese fears is that oil deliveries could be threatened at a time of international tension or conflict.
Supertanker construction is now a priority for state-owned shipyards as China becomes increasingly dependent on imported crude, mostly from the Middle East and Africa.
China imports almost half its crude. About 90 percent of these imports come by sea, but Chinese-owned tankers deliver less than 20 percent of this, according to reports in the official state media.
Japan, which is totally reliant on imported oil, ships up to 90 percent of its crude in Japanese-registered supertankers, which the industry calls very large crude carriers, or VLCCs.
"Japan has more than 100 VLCCs in its national fleet, which means its oil is carried on its own tonnage," said Matthew Flynn, managing director of WorldYards.com, a shipbuilding consultancy based in Hong Kong.
Bjorn Haugland, regional manager for greater China for the Norwegian maritime classification society, Det Norske Veritas, said the Chinese action reflected a desire for security.
"The main purpose is to make sure that you have a stable inflow of energy," said Haugland, who was based in Shanghai and worked closely with the major Chinese shipyards. "If you rely on other countries' vessels, you do not have the same control over the fleet."
The two major state-owned shipbuilding groups, China State Shipbuilding and China Shipbuilding Industry, have invested heavily in technology and massive new dry docks to build supertankers.
Work started on the first supertankers in the late 1990s, and there are now six yards building these ships for local and foreign owners.
Major Chinese shipping companies, including China Merchants Group, China Ocean Shipping, CSC Nanjing and China Shipping Group, have all placed multiple orders for supertankers, with more in the pipeline.
However, energy security and the Beijing plan to expand the supertanker fleet remain sensitive subjects for Chinese shipbuilders. Both major shipbuilding groups did not respond to repeated requests for interviews.
Some maritime analysts say that the desire by China to control its own supertanker fleet is understandable but that its sense of vulnerability may be exaggerated.
"There is a whole school of thought these days that flags and ownership of ships are almost irrelevant," said Sam Bateman, a maritime security expert at Nanyang Technological University in Singapore. "The argument is if you can pay the price, you will get the ship and the oil."
Bateman and some other experts question whether this reasoning would apply during war or intense competition for oil.
Chinese energy planners appear to share this lack of faith in the free market and have decided to build a national fleet. "That's a worthy objective and quite understandable," Bateman said.
China is already the world's third biggest oil importer, behind the United States and Japan, and its demand for oil is soaring as an energy-hungry economy continues its headlong expansion.
The economy grew 11.1 percent in the first quarter according to government statistics, exceeding the average 9.9 percent growth in the past four years.
The thirst for oil is increasing almost as fast. In its April 12 forecast, the International Energy Agency, a United Nations body, said that Chinese oil demand this year would increase to 7.6 million barrels a day, a rise of 6.8 percent.
China imported 162.87 million tons of oil last year, accounting for about 47 percent of Chinese consumption, according to official figures. This proportion is expected to increase to 50 percent by 2010, when imports were expected to reach 200 million tons, according to a forecast in April from the Chinese oil giant, China National Petroleum Corp.
If dramatic increases in car ownership continue in line with current projections, China could be importing about 10 million barrels of oil a day by 2020, on a par with current U.S. imports.
Imports are expected to make up a steadily increasing proportion of oil consumption because domestic output has stagnated for more than a decade despite intensive efforts to find new fields.
Based on current trends, competition for dwindling oil reserves could become intense in the decades ahead, with all major East Asian manufacturing economies heavily dependent on imports.
Some analysts predict that anxiety over oil deliveries could arise suddenly if conflict in the Middle East were to constrain output.
Chinese military thinkers have also raised the possibility that the United States might attempt to block oil shipments to China if conflict arose over Taiwan. The United States has a longstanding pledge to support Taiwan in the event of an unprovoked attack from the mainland.
More than 60 percent of the oil imported by China is shipped from the Middle East and Africa along extended sea lanes that pass through a number of vulnerable choke points, including the narrow Malacca Strait between Malaysia and Indonesia.
For the Chinese government, the accelerated construction of supertankers is just one of the measures it has adopted to enhance energy security.
Chinese state-owned oil companies have scoured the globe for oil reserves, investing more than $15 billion during the past five years to secure supplies in Africa, the Middle East, Central Asia, Russia and Latin America.
Beijing also plans to complete the construction of strategic oil reserve facilities by 2010 that will hold 100 million barrels, about two weeks' supply at current consumption levels, according to senior government officials.
As China increases its imports of liquefied natural gas, or LNG, shipping experts predict that it will also seek to exercise control over these deliveries.
"China has already started to build its own LNG carriers, and you will see more and more of these vessels ordered by Chinese owners," Haugland of Det Norske Veritas said.
China begins expanding its supertanker fleet
By David Lague
Wednesday, May 16, 2007
SHANGHAI: China has begun an ambitious effort to build a fleet of more than 90 supertankers to improve its control over oil imports which are vital to sustaining a booming economy, shipping industry experts say.
Government strategic planners in Beijing have set a target that half of the oil imports should be carried on Chinese-owned tankers. No deadline has been set to meet this goal, but Chinese shipping companies are expected to order as many as 65 supertankers, worth an estimated $7.1 billion, by 2012, according to transport analysts.
The move by China is seen as an attempt to gain more control over its energy supply.
"It is all about national energy security," said Yang Baohe, principal naval architect at the Marine Design & Research Institute of China in Shanghai, a subsidiary of the sprawling China State Shipbuilding Corp. "We have to be able to use our own ships to transport oil."
These ships, in addition to the existing Chinese fleet of 25 supertankers, would have the capacity to deliver about half of projected imports by about 2015.
A tanker fleet of that size would not put China in the same league as Japan, Norway or Greece, but it would be a sharp improvement in its oil shipment capacity.
Maritime security analysts say that one of the greatest Chinese fears is that oil deliveries could be threatened at a time of international tension or conflict.
Supertanker construction is now a priority for state-owned shipyards as China becomes increasingly dependent on imported crude, mostly from the Middle East and Africa.
China imports almost half its crude. About 90 percent of these imports come by sea, but Chinese-owned tankers deliver less than 20 percent of this, according to reports in the official state media.
Japan, which is totally reliant on imported oil, ships up to 90 percent of its crude in Japanese-registered supertankers, which the industry calls very large crude carriers, or VLCCs.
"Japan has more than 100 VLCCs in its national fleet, which means its oil is carried on its own tonnage," said Matthew Flynn, managing director of WorldYards.com, a shipbuilding consultancy based in Hong Kong.
Bjorn Haugland, regional manager for greater China for the Norwegian maritime classification society, Det Norske Veritas, said the Chinese action reflected a desire for security.
"The main purpose is to make sure that you have a stable inflow of energy," said Haugland, who was based in Shanghai and worked closely with the major Chinese shipyards. "If you rely on other countries' vessels, you do not have the same control over the fleet."
The two major state-owned shipbuilding groups, China State Shipbuilding and China Shipbuilding Industry, have invested heavily in technology and massive new dry docks to build supertankers.
Work started on the first supertankers in the late 1990s, and there are now six yards building these ships for local and foreign owners.
Major Chinese shipping companies, including China Merchants Group, China Ocean Shipping, CSC Nanjing and China Shipping Group, have all placed multiple orders for supertankers, with more in the pipeline.
However, energy security and the Beijing plan to expand the supertanker fleet remain sensitive subjects for Chinese shipbuilders. Both major shipbuilding groups did not respond to repeated requests for interviews.
Some maritime analysts say that the desire by China to control its own supertanker fleet is understandable but that its sense of vulnerability may be exaggerated.
"There is a whole school of thought these days that flags and ownership of ships are almost irrelevant," said Sam Bateman, a maritime security expert at Nanyang Technological University in Singapore. "The argument is if you can pay the price, you will get the ship and the oil."
Bateman and some other experts question whether this reasoning would apply during war or intense competition for oil.
Chinese energy planners appear to share this lack of faith in the free market and have decided to build a national fleet. "That's a worthy objective and quite understandable," Bateman said.
China is already the world's third biggest oil importer, behind the United States and Japan, and its demand for oil is soaring as an energy-hungry economy continues its headlong expansion.
The economy grew 11.1 percent in the first quarter according to government statistics, exceeding the average 9.9 percent growth in the past four years.
The thirst for oil is increasing almost as fast. In its April 12 forecast, the International Energy Agency, a United Nations body, said that Chinese oil demand this year would increase to 7.6 million barrels a day, a rise of 6.8 percent.
China imported 162.87 million tons of oil last year, accounting for about 47 percent of Chinese consumption, according to official figures. This proportion is expected to increase to 50 percent by 2010, when imports were expected to reach 200 million tons, according to a forecast in April from the Chinese oil giant, China National Petroleum Corp.
If dramatic increases in car ownership continue in line with current projections, China could be importing about 10 million barrels of oil a day by 2020, on a par with current U.S. imports.
Imports are expected to make up a steadily increasing proportion of oil consumption because domestic output has stagnated for more than a decade despite intensive efforts to find new fields.
Based on current trends, competition for dwindling oil reserves could become intense in the decades ahead, with all major East Asian manufacturing economies heavily dependent on imports.
Some analysts predict that anxiety over oil deliveries could arise suddenly if conflict in the Middle East were to constrain output.
Chinese military thinkers have also raised the possibility that the United States might attempt to block oil shipments to China if conflict arose over Taiwan. The United States has a longstanding pledge to support Taiwan in the event of an unprovoked attack from the mainland.
More than 60 percent of the oil imported by China is shipped from the Middle East and Africa along extended sea lanes that pass through a number of vulnerable choke points, including the narrow Malacca Strait between Malaysia and Indonesia.
For the Chinese government, the accelerated construction of supertankers is just one of the measures it has adopted to enhance energy security.
Chinese state-owned oil companies have scoured the globe for oil reserves, investing more than $15 billion during the past five years to secure supplies in Africa, the Middle East, Central Asia, Russia and Latin America.
Beijing also plans to complete the construction of strategic oil reserve facilities by 2010 that will hold 100 million barrels, about two weeks' supply at current consumption levels, according to senior government officials.
As China increases its imports of liquefied natural gas, or LNG, shipping experts predict that it will also seek to exercise control over these deliveries.
"China has already started to build its own LNG carriers, and you will see more and more of these vessels ordered by Chinese owners," Haugland of Det Norske Veritas said.
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