World Energy Outlook 2007

imports is demonstrated by the Alternative Policy Scenario. China’s oil imports
are cut by 26% in 2030, compared with the Reference Scenario, while India’s
imports are reduced by 19%. Most of the imports savings come after 2015, as
the effects of new policies build up.
Establishing emergency stocks could play a particularly important role in
enhancing short-term security. On current plans, net import coverage from
these stocks is expected to be around 20 days in China and 16 days in India
by the beginning of the next decade. In the longer term, it is likely that
both countries will seek to increase this coverage: India plans to increase it
to 90 days – the coverage of total stocks that IEA member countries are
required to maintain. However, a date for achieving that goal has not been
set, mainly because of the high cost of building and maintaining storage
facilities and the cost of buying the oil itself. Uncertainties about future
import needs can lead to reluctance to act. The IEA is collaborating with
China and India on enhancing their collective emergency response
capabilities (see Chapter 6).
By way of an example, at current import levels, to achieve forward net import
coverage of even 45 days on a similar basis to IEA countries (i.e. including
commercial stocks), China would need to store a total of 156 million barrels
(Table 4.7). For the same level of coverage, China’s stocks would need to rise
massively in 2030, to 589 Mb, in the Reference Scenario and 772 Mb in the
High Growth Scenario. In India, stocks would need to rise to 84 Mb to achieve
45 days of net import coverage at 2006 levels. The required level of stocks
would need to rise to 271 Mb in 2030 in the Reference Scenario and 345 Mb
in the High Growth Scenario. Achieving these levels of stocks would involve
heavy financial commitments. Assuming that all the oil stored is crude, the
total cumulative cost of building stocks to cover 45 days of net imports would
reach $38 to $74 billion in China and $19 to $33 billion in India by 2030
(Figure 4.11). 8 In the Reference Scenario, the cost would be equivalent to close
to 10% of total oil investment in China and 15% in India. The use of
emergency stocks in the event of a supply disruption would be much more
effective if co-ordinated with the use of stocks under the IEA emergency
response system.
Much has been written about the impact on consuming countries of moves by
China and India to exert control over hydrocarbon resources in the producing
countries through equity oil and direct government-to-government deals. To
the extent that Chinese and Indian companies over-bid for resources, costs and
8. Based on estimated capital costs of storage facilities of $16.50 per barrel. Total costs include buying
crude oil, operation and maintenance, and capital.
188 World Energy Outlook 2007 - GLOBAL ENERGY PROSPECTS: IMPACT OF DEVELOPMENTS IN CHINA & INDIA