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China might create its own integrated shipping system for imported oil via cooperative agreements among State-owned shipping lines, refineries and insurance bodies, with the goal of ensuring energy security, said a senior government official.
Up to 90 percent of China's crude oil imports are transported by sea, a situation that leaves it exposed to changing international conditions, said He Yongjian, deputy director of the department of development planning of the National Energy Administration.
He commented during a recent forum in Beijing called the Journey of Harmonious Energy, which was part of a national exhibition.
He said ocean shipping is a weak point in China's energy security. "Only one-third of the imported oil is transported by our own ships," he said.
Moreover, when it comes to insurance, foreign companies are dominant, with "very limited" participation by domestic insurers.
He said the government will encourage domestic insurers to expand coverage for seaborne oil trade and explore possible financial instruments for such insurance.
China's oil imports have soared in recent years, but domestic shippers have largely ignored this business. The main reasons for their low participation include the long construction periods for crude carriers and the high risks of long-distance ocean shipping, said Huang Wensheng, spokesman of Sinopec Group, the country's second-largest oil producer.
He added that attacks by Somali pirates involved "huge compensation of about 150 million yuan" ($23.8 million) per ship, which was enough to bankrupt a small or mid-sized insurer.
These factors "can explain why most domestic insurance and shipping companies hesitate to enter the business", Huang said.
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