Diesel shortage prompts imports

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Drivers waiting at a filling station at Xianyang city in Shaanxi province. Many of them had been there for three days because of recent shortages of diesel fuel across the country.

Demand for fuel is set to increase until early next year, according to IEA figures

BEIJING - Chinese state refiners will ramp up diesel imports, starting this month, to help meet the increased demand that has depleted stocks at 2,000 retail fuel stations in the country's eastern and southern provinces.

China Petroleum and Chemical Corp, the nation's biggest refiner, is seeking to import as much as 200,000 tons after buying 80,000 tons earlier in November, the company's parent Sinopec Group said in its online newsletter.

The price of Asia gasoil, or diesel, has risen 12 percent more than Dubai crude so far this month on speculation Chinese demand for the fuel will increase.

China is battling a gasoil shortage partly because factories use their own diesel-powered generators to provide backup after some local governments suspended power supplies to conserve energy.

PetroChina Co and China Petroleum are boosting oil processing to record levels this month to ensure adequate supplies.

PetroChina plans to import 35,000 tons of diesel, the Xinhua News Agency said on Friday, citing an unidentified company official. The report didn't say when the shipments will arrive.

Many small businesses across the country began to use diesel to generate power amid outages imposed to meet energy conservation targets, a factor viewed as a major reason for the shortage by Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University.

At least 2,000 service stations closed after running out of diesel, Xinhua said on Nov 7. Supplies in other cities including Beijing, Shanghai, Chongqing, Dalian and Wuhan are also tight, according to the news agency.

The diesel shortage is likely to continue until the end of this year as many businesses are still using the fuel to generate power for their operations, said Lin, adding "I don't think they have an alternative to using diesel".

Although the government has asked major diesel producers to boost output and increase imports to ease the shortage, it will take some time for the situation to turn around, said Lin.

China's diesel demand growth may increase until February next year, according to the International Energy Agency (IEA).

The IEA predicted that daily diesel consumption between October this year and February 2011 will be 70,000 barrels higher than had been previously forecast.

The IEA said demand will return to normal levels by February, when the energy-saving target is achieved.

If the diesel shortage drags on, China may slash exports and encourage imports, according to the IEA.

IEA data shows that the country's daily diesel demand will rise by 10.5 percent to 2.98 million barrels in 2010, and the figure will continue to increase by 9.8 percent to 9.2 million barrels in 2011.

Dong Xiucheng, deputy director of the Business and Management School at China University of Petroleum, said that the shortage may gradually ease in the final two months of this year.

Bloomberg News