In 2022, China had 100 fewer petrol stations than in 2021, with the number falling to 107,600, according to the 2022-2023 “Blue Book” on the petroleum distribution sector.
At the same time, car ownership grew 5.8 per cent on the previous year, reaching 319 million units. And the national road network expanded by more than 74,000km – to reach 5.35 million km.
The 0.11 per cent decrease in petrol station prevalence may look insignificant. But after years of continuous growth, it could mark an inflection point for both the transportation sector, and the oil and gas industry, against the backdrop of China’s dual-carbon goals, to peak carbon emissions before 2030, and reach carbon neutrality before 2060.
The Blue Book suggests filling stations are threatened by a combination of weaker consumer demand, itself spurred by the pandemic and high oil prices, and the quickening shift from conventional to electric vehicles (EVs). Such stations must be transformed to cater for multiple energy sources, it states.
The rise and fall of petrol stations
China’s first commercial filling station was built in Shanghai in 1924. From the late 1970s, reform and opening-up policies meant the gradual loosening of controls on prices of refined oil products, including petrol, kerosene, diesel, and alternative fuels such as ethanol-blended petrol and biodiesel. Filling stations became a lucrative business opportunity.
In 1980, there were around 610 in China. By 2000, that had rocketed to more than 94,000, on the heels of the rapid expansion of the oil and gas, and automotive, industries. The number at that point was higher than car ownership figures required, and it has changed little since. Competition is fierce and the market remains saturated. Yet steady, incremental growth had been maintained, until last year.
The trend is clear… Electric vehicles are crowding conventional cars out of the market, and this in turn affects the number of gas stations.Emma Wang, clean transportation programme lead, Innovation Center for Energy and Transportation
According to the latest Blue Book, half of China’s filling stations are operated by the industry giants Sinopec (29 per cent) and PetroChina (21 per cent). The remainder are privately run (46 per cent), state-owned, through corporations like China National Offshore Oil Corporation (1 per cent), or represented by foreign brands such as Shell (3 per cent).
Experience from the world’s leading filling station markets shows how numbers can peak and then fall back. The number in the US began slowly coming down about 20 years ago; in Japan, it peaked at around 60,000 in 1994, and has steadily declined since – with 27,000 recorded in the first half of this year.
PetroChina will have about 160 fewer stations in 2022 than in 2021, according to the Blue Book. While Sinopec will see its number edge up by 0.1 per cent. Sectoral experts and the Blue Book all point to the explosive growth of EVs as an influencing factor.
China Dialogue spoke to Emma Wang, clean transportation programme lead at thinktank the Innovation Center for Energy and Transportation (ICET). “The trend is clear… Electric vehicles are crowding conventional cars out of the market, and this in turn affects the number of gas stations,” she said.
In with electricity, out with petroleum
The shift from internal combustion to electric engines in recent years has been evident in sales figures.
Last year, 6.9 million “new-energy vehicles” – meaning plug-in hybrids, all-electric battery vehicles, or those powered by methanol and hydrogen – were sold in China, up 93 per cent on 2021. Around 77 per cent of those were all-electric, with plug-in hybrids comprising roughly 22 per cent.
The Blue Book records ownership of new-energy vehicles reaching 13.1 million units in 2022, or 4.1 per cent of all vehicles on the road. This might seem too low to affect the number of petrol stations, but their rapidly rising share of sales suggests that the replacement of conventional vehicles is well underway.
The China Passenger Car Association (CPCA), which publishes data on the automotive industry, expects annual EV sales in China to reach 8.5 million for 2023. That would be 36 per cent of the country’s entire new vehicle market. At the current rate of increase, by 2025 EVs should account for more than 10 per cent of car ownership in China.
Just as the popularisation of conventional cars prompted the spread of petrol stations, explosive growth in EV sales has given rise to infrastructure for battery charging and “switching” (where you can quickly swap a battery for a fully charged replacement). The number of charging units in China grew to 5.2 million in 2022. (Of these, 2.2 million were located at public charging stations – some integrated into existing petrol stations, and some on new plots.) That is equivalent to one charger for every 2.7 EVs on the road. By 2022, 310 hydrogen-refuelling facilities had also been set up.
Wang says that in recent years the state has rolled out a series of policies to encourage EV development, including by installing charging infrastructure. The latest policy piece, released in June, calls for charging technology to be built into residential areas, “ensuring that 100 per cent of fixed parking spaces are fitted with or ready for charging facilities”, while also encouraging “vigorous efforts to construct charging infrastructure in public areas.”
According to data from the China Electric Vehicle Charging Infrastructure Promotion Alliance, 7.6 million charging units were in place across the country as of September. The infrastructure has developed in step with the spread of EVs, and it would be reasonable to assume this has removed some of the demand for petrol stations.
Demand for oil is due to peak early
As well as exposing the surplus in China’s saturated filling stations market, the advance of EVs is also impacting the demand for petrol.
According to Blue Book data, China’s apparent consumption (production, plus imports, minus exports) of refined oil products was 333 million tonnes in 2022, up 5.1 per cent year-on-year. Consumption of petrol, however, which typically accounts for about 40 per cent of refined oil consumption, was down 4.5 per cent, to about 133 million tonnes.
The International Energy Agency forecasts that global demand for oil, natural gas and coal will peak ahead of 2030. While that timeline is contested, analysis from a number of bodies converges on the view that China’s oil demand will most likely peak in 2024.
Sinopec, having previously predicted that 2025 would be the year, raised eyebrows in August with a statement that petrol demand in China should peak in 2023.
According to Cui Dongshu, secretary-general of the China Passenger Car Association (CPCA), the near peaking of petrol demand means that peak carbon has effectively been attained in China’s domestic passenger car sector. When considered alongside the declining demand for diesel vehicles, which are being substituted with EV trucks, Cui says “victory is now in sight” for peak carbon across automotive transportation as a whole.
Analysis published in August, which first appeared in Sinopec Monthly, predicts that annual petrol consumption in China will be down by about 30 million tonnes by the time EV ownership hits 20 million, which could happen this year. At that point, 20 per cent less petrol would be needed compared to if all cars were conventional oil users, striking a heavy blow to the petroleum consumer market. An industry source told the media that demand for petrol will drop quickly after peaking and could be less than half its current level by 2045.
Yin Qiang, vice president of the Beijing Clean Fuel Industry Association, believes that filling station numbers will decline rapidly as EVs proliferate and the demand for refined oil products shrinks. Oil industry research forecasts that the number of petrol stations needed in China will fall to 104,000 by 2035, 81,000 by 2040, and 37,000 by 2050.
Next stop, the ‘comprehensive energy service station’?
Petrol stations are not just about selling petrol. The non-fuel side of the business has always had greater profit margins: food and drink, car washing, auto repairs, spare parts, advertising and communications.
PetroChina and Sinopec began adding convenience stores to their filling stations more than a decade ago, and now they lead the sector: Sinopec’s Easy Joy chain has more than 28,000 outlets, while PetroChina’s uSmile has 20,178.
In China, however, non-petroleum business currently accounts for less than 10 per cent of filling station profits. Compared to the 40-50 per cent share that is typical outside of China, this leaves ample space for growth.
In addition to taking on more non-petroleum business, filling stations are now looking to transform themselves as demand shifts towards new sources of energy.
Sun Renjin is a professor at the China University of Petroleum, and one of the Blue Book’s lead editors. Speaking to the media in April, Sun said: “The development of comprehensive energy service stations – for petroleum, natural gas, electricity, hydrogen and servicing – will gain in pace and scale as the penetration rate of EVs grows.”
The State Council’s 2020 EV development plan proposed that existing sites and facilities be used to provide a comprehensive service covering petroleum, natural gas, hydrogen and electricity. Then, in 2022, guidelines were issued that positioned petrol station transformation within the national energy transition. They specifically underline that traditional petrol and natural gas filling stations should “develop comprehensive service facilities for transportation energy, integrating petroleum, natural gas, electricity and hydrogen”.
PetroChina and Sinopec began piloting battery charging and switching at their filling stations seven or eight years ago. By the end of 2022, PetroChina had 416 charging and switching stations, and Sinopec had 2,299 (again, some of these were situtated within existing petrol stations, some separately). The latter is planning for at least 5,000 by 2025.
Transformation is not easy
Despite this evident progress, there are obstacles on the road to converting China’s filling stations into comprehensive energy service stations.
Foremost among these is space. Petrol stations in Chinese cities tend to be fairly compact, with little room to add in charging and switching services or hydrogen refuelling.
China Dialogue talked to someone in the battery-switching business, who chose to remain anonymous: “PetroChina and Sinopec’s push for comprehensive energy stations hasn’t been particularly successful so far. Filling stations are distributed according to the prevalence of conventional vehicles. Just because there’s a petrol station, it doesn’t mean it makes sense to fit a charging point. Secondly, there’s the question of rent, because new-energy firms need to lease space from filling station operators, and the higher the rent, the harder it is to make a profit.”
Safety poses a challenge also linked to space. According to the “Technical Standards for Petroleum, Natural Gas and Hydrogen Vehicle-Filling Stations” published in 2021, charging facilities must be in an ancillary services area, separated from petroleum, natural gas and hydrogen refuelling. They also have to comply with distance regulations concerning any other places that may be generating sparks or naked flames.
Even plans to expand existing petrol-filling stations face multiple challenges, including the current low utilisation of charging points, rising electricity tariffs, incompatible battery-switching brands and a lengthy application process.
Fitting petrol stations with charging units requires investment, while future electricity tariffs and the timescale for payback and profitability remain uncertain. Furthermore, operators of public charging facilities in China are generally making a loss at present.
Hydrogen refuelling at filling stations is, similarly, a matter of long-term development. Sinopec had 74 hydrogen-refuelling stations in 2022, making it the world’s largest developer and operator of such facilities. But hydrogen refuelling still awaits the right applications, requires massive investment, and can be difficult to profit from due to a range of factors including hydrogen prices.
Change reaches far beyond filling stations
Transport accounted for more than 10 per cent of China’s carbon emissions in 2022, the third-largest source after power and industry. And road traffic generated around 85 per cent of transport’s carbon emissions. Substituting conventional vehicles for EVs is therefore an important part of breaking oil dependence and achieving China’s dual-carbon goals. Against this backdrop, the decline of traditional filling stations can be seen as a footnote to history.
The rising penetration of EVs is impacting more than filling station numbers, according to some providers of comprehensive energy services. The peripheral retail and supply infrastructure of the conventional automotive industry will also have to change, as will the operations of oil companies.
The State Council’s “Action Plan for Carbon Peaking by 2030” declares that, by 2025, domestic capacity for primary crude oil refinement will be held at less than 1 billion tonnes per year. With China’s refinement capacity already at around 980 million tonnes in 2022, there is little headroom for growth. Meanwhile, EV proliferation has weakened demand for refined oil products.
In response, the Blue Book suggests the refinement and chemical industries reduce their capacities for such products, while turning to new, high-value-added chemical materials and products. In other words, they must transform themselves from “fuel-based” refiners into “chemicals-based” refiners.
Transformation is underway throughout the automotive industry, not just in filling and charging stations. Between them, PetroChina, Sinopec, the China National Offshore Oil Corporation and Sinochem have set up and deployed more than 40 new-energy companies across the whole of the new energy industrial chain. The oil firms’ low-carbon transition is gaining momentum.
By Liu Lican
댓글