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Jidong Nanpu Oilfield Produces Big Pay

The 1.02 billion metric tons of oil equivalent in the newly discovered Jidong Nanpu Oilfield will bolster the company's oil reserves by 55 percent and its gas reserves by 9 percent, the China National Petroleum Corporation (CNPC), the country's No. 1 oil and gas producer, said on May 9.

Analysts said the discovery in Tangshan and in the adjacent Jidong tidal and shallow-water areas of the Bohai (Bo Sea) will bolster the country's strategic position in relation to oil.

The oilfield is located on land and in inshore areas at a depth of about 1,800 metres–2,800 metres, according to CNPC. The shallow depth and location means the oilfield can be exploited at a cost of about 59 US cents per barrel, compared with an international standard cost of about US$1.20–$1.50 per barrel.

The discovery of the Jidong Nanpu Oilfield is the most significant oil find in four decades in China, according to the Shanghai Securities News.

CNPC has said the company will start to develop the Jidong Nanpu Oilfield as soon as possible. The first-phase of the project, to be finished by 2012, is expected to yield 10 million tons per year.

Output is expected to rise progressively to 25 million tons a year, making the oilfield China's third largest after Daqing and Shengli.

The find also increases Hebei Province’s

Caofeidian Industrial Zone’s chances of becoming a national strategic oil reserve base, said an official with CNPC.

China consumed 320 million tons of oil in 2006.

10.8 Percent Growth Expected in China’s Economy

The country’s gross domestic product (GDP) is expected to grow by 10.8 percent in the second quarter of 2007, although the expansion of the country’s trade surplus should slow during the period, according to a report published on May 8 by the State Information Centre.

The consumer price index (CPI) is expected to reach 3 percent in the same period, the report said.

The centre said the economy’s consistently strong growth in the second quarter would be backed up by brisk growth in consumer spending and investment despite tightening measures that have been put in place.

The report also said the growth of the country's trade surplus would slow significantly on the back of a dramatic increase in the surplus in the second quarter of 2006, renminbi revaluation, a slowdown in the United States and local efforts to cut China's export rebates.

Rising prices of grain and in real estate will be major factors contributing to an upward trend of the CPI.

Driven by strong investment and trade growth, China's economy grew by 11.1 percent in the first quarter.

Country’s Trade Surplus Large but Slowing in 2007

China's trade surplus will rise to US$254 billion in 2007, a 42.8 percent year-on-year increase, but the rate of growth will begin to slow, according to a recent study by the Centre for Forecasting Science of the Chinese Academy of Sciences.

The study predicted that the gap between imports and exports should narrow this year with export volume expected to reach US$1.2 trillion, up 23.7 percent from 2006, while imports will increase by 19.5 percent to US$945.6 billion.

The forecast was based on analyses of world and domestic economies, and customs data released at the end of March.

The trade surplus between China and the United States will increase by 23.5 percent, according to the report, while that between China and the European Union will increase by nearly 45 percent to the US$128.7 billion.

The trade surplus in the high-tech sector is expected to double in 2007 to $66.9 billion, the report said. High-tech exports will increase by 29.2 percent to 363.6 billion dollars, and China will import US$296.7 billion of high-tech products, an increase of 20 percent.

Aluminium Imports Decline, Production Expands

China imported 254,323 metric tons of aluminium ingots and aluminium products in the first quarter of 2007, a decline of 7.7 percent year-on-year, according to customs statistics.

Alumina imports fell by 13.9 percent to 1.47 million metric tons in the three months.

The decline was attributed largely to expanding domestic production, said Yang Hongjie, an analyst with Haitong Securities.

Yang predicts that domestic production will likely slow down in coming months as the Chinese Government relies on stricter measures to curb an extraordinary expansion in production capacity for alumina, aluminium ingots and aluminium products.

This is in line with the latest policy of slashing surplus production capacities for high energy consumtious, polluting industries.

Some industry observers said import duties on raw materials would probably be scrapped in the near future. However, the policy is not seen as helpful for alumina imports, as domestic buyers prefer local products.

Power Firm Eyes Wind, Hydro Power

China Power International Holdings Limited, parent of the fifth-largest Chinese mainland electricity producer, said on May 8 that it will add 1,000 megawatts of generating capacity powered by wind and hydro sources by 2010.

General Manager Li Xiaolin said the new capacity is being added, with another 1,000 megawatts in the planning stage, according to Bloomberg News.

China plans to invest 45.6 billion yuan (US$5.9 billion) on the mainland to more than triple wind-power generation capacities by 2010 to cut pollution and reduce dependence on coal and crude oil. The mainland may overtake the United States as the world's biggest emitter of greenhouse gases this year or in 2008, the International Energy Agency said on April 25.

“China Power will focus more on the use of new energy sources in future,” Li said. "We will develop wind, hydro and biomass projects.”

The company is building a 200-megawatt wind power project in Jiangsu Province and construction is expected to be completed by the end of 2009, Li said. A 100-megawatt wind power project in the northern province of Gansu will begin generating electricity by the end of 2007, she said.

SINOPEC Issues Corporate Bonds

SINOPEC, Asia's largest refiner in terms of capacity, will issue mid-to-long-term corporate bonds to finance a 65 billion yuan (US$8.4 billion) cross-region gas-transfer project, according to a company statement released on May 9.

“By using bond issuance the company wants to ensure the interest rate amid concerns over (benchmark interest) rate hikes,” said an unnamed company official.

The statement said the company would decide the total amount to be issued in line with its actual needs and whether the bonds are issued all at once or in separate stages.

The coupon will not exceed 90 percent of the central bank's simultaneous benchmark interest rate for loans, said the statement.

The issuance will be examined by the National Development and Reform Commission, but the company said it will strive to shorten the process in order to limit costs.

SINOPEC has plans for  110.1 billion yuan (US$14.2 billion) in capital investment in 2007.

ICBC Applies for New York Branch

The Industrial & Commercial Bank of China Limited applied to open its first branch in New York as part of a plan to accelerate its overseas expansion and to become a global player.

The bank is awaiting approval to upgrade its representative office to a branch that can offer lending and deposit services, the US Federal Reserve said on its Web site.

ICBC plans to add more outlets in countries with “strong trade and economic ties with China,” said Pan Gongsheng, board secretary of the Beijing-based bank. ICBC, in October 2006, raised US$22 billion in the world's biggest initial public offering.

Local rivals are seeking to expand globally as international banks enter China, threatening to erode margins on lending.

The bank in January agreed to buy 90 percent of PT Bank Halim Indonesia, marking its first overseas purchase.

Australia's Largest Trade Partner: China

China has become Australia's biggest trading partner, surpassing Japan, according to the Australian Bureau of Statistics (ABS).

A May 4 ABS statement said exports and imports between China and Australia were valued at about US$43.2 billion in the 12 months to March. The figure for Japan was US$41.5 billion.

Craig James, chief economist of Commsec, Australia's leading Internet broker, said it is a significant development.

“This is clearly a red-letter day in Australia's history,” he was quoted saying on Australian Broadcasting Corporation radio.

“For the first time, China is Australia's largest trading partner,” he said. “It's usually been the case that Japan and the United States have vied for supremacy, but China has clearly passed Japan as our biggest trading partner.”

Central Bank to Retain US-Dollar Reserves

China’s central bank on May 10 said the country will not sell large amounts of US-dollar-denominated assets to diversify its foreign exchange reserves.

The People's Bank of China also warned of a risk of rising inflation and a rebound in investment as the economy steamed ahead in the first quarter, growing by 11.1 percent year on year.

Authorities have said the country will diversify part of its foreign exchange reserves, which amounted to US$1.02 trillion by the end of March and are believed to be invested mainly in dollar-denominated bonds.

The central bank said it will mainly address the issue of newly added reserves by widening foreign currency investment channels and by reaffirming the importance of its US dollar-denominated assets. They will remain an important part of China's outbound investment, the bank said in its monetary policy report for the first quarter, which was published on its Web site on May 10.

The bank also said it would keep the yuan basically stable at a reasonable level.

Civil Aviation Industry Posts Higher First-Quarter Profits

The civil aviation industry racked up profits of 530 million yuan (US$68 million) in the first quarter, compared with losses of 1.34 billion yuan (US$174 million) in the same period of 2006, according to the General Administration of Civil Aviation (CAAC).

Rapid growth in revenues and profits in the industry reportedly stemmed from declining oil prices and booming markets.

The airlines carried 40.9 million passengers, up 15.9 percent, and 858,000 metric tons of cargo, up 13.3 percent, in the first three months.

Operating costs were down in the first quarter because the government slashed the price of jet fuel by 180 yuan (US$23.40) per metric ton at the beginning of 2007.

Ma Xiaoli, an analyst with CITIC Securities, said earlier in 2007 that for every 100 yuan (US$13) per ton increase in fuel costs, annual profits decreased 220 million yuan (US$28.6 million) for China Eastern, 250 million yuan (US$32.5 million) for China Southern and 180 million yuan (US$23.4 million) for Air China.