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China’s energy revolution calls for rethink by fossil-fuel ports

   February 19, 2018        353   

A logistics researcher in Zhoushan, East China’s Zhejiang Province has called for a timeout in building massive ports for crude oil imports, as the nation’s energy consumption transformation could make billions of yuan worth of investments obsolete.

Port construction has been booming in response to the Chinese central government’s call for the establishment of free trade ports, with local governments scrambling apply for such status.

According to a report released by the website of the China Securities Journal newspaper on January 31, more than 10 provinces and cities across China plan to “actively explore [the possibilities of] establishing free trade ports.”

While these potential free trade ports try to stand out, ports focusing on crude oil imports should fully consider the fast rise of the new-energy vehicle (NEV) industry in China, Cai Yiming, a researcher at Ningbo-Zhoushan Port and Shipping Administration in East China’s Zhejiang Province, told the Global Times in a recent interview.

Cai’s call comes as many of the ports competing to be among the first batch of free ports are heavily reliant on handling and storing fossil fuels.

Some experts have said that the free trade port in Ningbo-Zhoushan Port, the world’s busiest port by cargo tonnage since 2010, could specialize in energy trade due to its advantages in the sector. From January to August 2017, customs officers in Ningbo reportedly cleared crude imports of 32 million tons, up 8.5 percent year-on-year.

Cai said that as China steers toward a car industry based on NEVs, the oil trade will lose its luster.

“In 30 years or probably less, you will see the level of imports shrink, so fossil fuel ports need to shift their development focus,” Cai, an expert in the economics of crude oil transportation, told the Global Times.

Fixed-asset investment by these ports includes berths accommodating very large crude carriers, which have displacement of 300,000 tons or even 400,000 tons, and massive oil storage tanks that require costly maintenance. The storage facilities also pose environmental hazards.

“When imports slump, this will pose problems,” Cai said, warning that China’s demand for imported crude is nearing a peak.

China, the world’s largest auto market, released guidelines in September 2017 in which it set a target of having 8 percent of automakers’ sales be battery electric or plug-in hybrid vehicles by 2018, rising to 10 percent in 2019 and 12 percent in 2020.

In response to the guideline, carmakers are trying to offer more electric and plug-in hybrid vehicles, in part to comply with production quotas for such cars.

Last year, NEV sales in China reached 777,000 units, up 53.3 percent year-on-year, according to people.com.cn, while total sales of passenger cars reached 24.72 million units.

Globally, many Western carmakers have announced plans to shift away from cars powered by traditional internal combustion engines.

“If a future of clean-energy vehicles materializes during the period from 2020 to 2050, it would be a terrible waste for China’s fossil fuel ports to have invested billions of yuan in oil tanker berths and onshore oil storage facilities,” Cai said.

Cai said the development of free trade ports should be linked to the development of the new-energy industry, because such ports facilitate a free flow of talent, capital and technology, as well as providing superior logistics conditions. The function of such ports should shift from those handling crude oil trade to those that handle trade related to NEVs and their technology.

“Ports based on the import of traditional fossil fuels should consider immediately embarking on a transformation path with the future in mind, given China’s environmental and resource constraints,” Cai said. “That effort will increase China’s overall competitiveness.”

Such ports can also be connected with new technologies such as smart grids, as well as harnessing tidal and wind power, according to Cai.

From The Global Times

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