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January 7, 2004

China to ship more oil imports under own flag

According to China Daily, China is considering shipping half its oil shipments by its domestic crude tanker fleet by 2005, in a US$10 billion program to improve the security of China's vulnerable oil supply.

At present, only 10 percent of these imports are carried by the domestic fleet.

"Officials indicated that the scheme is in its infancy," says China Daily, "but relevant ministries are lobbying the State Council to speed up the process."

The plan is just one step taken by the government since last year to increase energy security, including building up strategic oil reserves, launching a national geological survey on oil deposits and introducing long-term energy policies.

China Daily reports Zhang Guofa, deputy director of the water transport department at the Ministry of Communications, as saying in December that the Chinese -flag fleet is expected to ship 50 million tons of crude oil imports, or half of the nation's total imports. With oil import growth, the total carried under Chinese flag will increase to 75 million tons by 2010 and to 130 million tons by 2020, Zhang reportedly said.

An official from the Ministry of Communications told China Daily that his ministry, along with the National Development Reform Commission, is studying the program to shift imports to Chinese ships.

Although the scheme is in its early stages, "we hope to lobby the State Council to establish a high-profile committee this year to push the program," the official, who declined to be named, told the newspaper.

To increase crude transportation, domestic companies need to double their shipping capacity to around 10 million tons by 2005, said the Ministry of Communications official.

The Ministry of Communication has drafted a report to suggest the State Council offer favorable policies, including tax rebates and subsidies, to finance the shipbuilding, says the China Daily story.

The official admitted that oil companies have to be persuaded "to allow domestic firms to transport more oil for them because oil companies have their own economic considerations."

"But all have agreed that the issue is beyond mere economic concerns, it is one of national security,'' he said.


Chinese shipyards may soon have the capacity to build the tonnage demanded by a large scale switch to the domestic flag. Output has been growing rapidly and massive capacity expansion is under way.

Chinese yards built an estimated six million deadweight tons (DWT) of ships in 2003--a record high and up 46 percent year-on-year, Xinhua reported yesterday.

The news agency reports Zhang Guangqin, deputy director of China's Commission of Science, Technology and Industry for National Defense, which oversees the shipbuilding sector, as saying the figure represented about a 10-percent share of the world's market.

The new ships Chinese shipyards built last year accounted for 18 percent of the world's total in terms of tonnage, as against 13 percent in the previous year, while new orders it clinched in 2003t otaled 18 million tons, up 173 percent, the official said.

The overall backlog Chinese yards have yet to deliver stands at 25 million tons, an increase of 93 percent.

Zhang said Chinese yards would have to work at full capacity until the end of 2006 to deliver the ships ordered by its domestic and overseas clients.

Meantime, China State Shipbuilding Corporation  (CSSC) began construction on the Changxing Shipbuilding Base on the Shanghai coast in 2003, which will be the largest shipyard of its kind in the world when completed in 2015. Its annual shipbuilding capacity will reach eight million tons.

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