China's oil supply is facing risks, which need to be solved mainly through domestic efforts, an oil expert said.

Zhu Jianjun, a researcher with China National Petroleum Corporation (CNPC), China's largest oil producer, said at a forum on China's energy strategy recently that it is not oil shortage but the uneven distribution of oil resources that caused instability in the world oil market.

Soaring oil price is the first risk, Zhu said.

Rapid growth of the world economy has led to a sharp rise of oil consumption in recent years. Conflicts and financial speculation also help to drive oil price higher. Depreciation of the U.S. dollar is another factor for the oil price hikes, he said.

According to statistics, China spent 43 billion US dollars importing oil in 2004 and the figure rose to over 50 billion US dollars in 2005.

Zhu predicted that China's spending on oil imports will keep rising as its imports increase and international oil price remains at a high level.

Transportation also poses a problem for China's oil supply, Zhu said.

China now imports 140 to 150 million tons of oil a year, and over 70 percent of the imports have to go through the Malacca Straits in Southeast Asia. As the channel is now near its capacity, other channels have to be found, he said.

China imported some 110 million tons of crude oil in 2004, but only 9 percent was shipped by Chinese oil tankers.

According to statistics of Shanghai Shipping Exchange, by October 2005 China had more than 590 oil tankers with a combined capacity of only 12 million deadweight tons.

To remove the risks, China must rely on increasing domestic oil and natural gas supply as well as develop overseas sources to ensure diversified supply and transportation channels, Zhu said.

China should establish its own oil strategic reserve system and early warning system, improve energy efficiency and develop alternative energies to reduce oil consumption so as to ensure oil supply security, he said.

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