Oil and Gas Market Update for covering entire month of September 2013

• China Base Oil import has increase by 59% in July 2013 as compared to previous month imports.
  China to become world’s largest net oil importer
• The US Energy Information Administration (EIA)’s August 2013 Shortterm energy outlook (STEO)
  projects that China’s net oil imports will exceed those of the US by October 2013 on a monthly basis and
  by 2014 on an annual basis, making China the largest importer of oil in the world. The imminent
  emergence of China as the world’s largest net oil importer has been driven by steady growth in Chinese
  demand, increased oil production in the US and a flat level of demand for oil in the US market.
• Total US annual oil production is expected to rise by 28% between 2011 and 2014, to nearly
  13mn b/d, primarily from shale oil, tight oil and Gulf of Mexico deepwater plays. In the meantime,
  Chinese production increases at a much lower rate (6% over this period) and is forecast to be just a third
  of US production in 2014.
• On the demand side, China’s liquid fuels use is expected to grow by 13% between 2011 and
  2014 to more than 11mn b/d, while US demand hovers close to 18.7mn b/d, well below the peak US
  consumption level of 20.8mn b/d in 2005.
• Looking beyond 2014, higher US oil production and stagnant or declining US oil consumption,
  coupled with China’s projected strong oil demand growth and slow oil production growth, suggest that
  once China replaces the US as the world’s largest net oil importer, the gap between net oil imports in
  China and the US will grow.
• There are several different ways to measure oil import dependence, reports the EIA.
  Discrepancies in the way dependence is assessed arise because oil is imported as crude oil but
  consumed as refined products, of which crude oil is the main but not only input. Net oil imports reflect
  the broadest measure of liquid fuels and include the following elements in the volumes of oil liquids
  produced and used within national borders: crude oil, lease condensates, natural gas liquids, biofuels,
  other liquids, and refinery processing gain, which in the US has been roughly 1mn b/d in recent years.
• Another common (and narrower) measure of oil import dependence is the ratio of net imported
  crude oil to net crude oil inputs to refineries, comments the EIA. The US has emerged as a significant net
  exporter of petroleum products in recent years and a portion of US crude oil imports is used to produce
  products not consumed domestically. The advent of China as the world’s largest importer based on the
  narrower measure occurs on a different schedule than for the broader one, but the basic trends and
  drivers remain the same as for the broader measure. However, imports of crude oil alone do not
  automatically imply domestic dependence on foreign supplies, the EIA notes.