China has chalked up an oil and petrochemical trade deficit of more than US$30 billion, prompting greater urgency to conserve and find replacement fuel, according to the chief of an industry association. Total imports of crude oil, petrochemical raw materials and organic chemicals amounted to more than US$80 billion last year, said Tan Zhuzhou, chairman of the China Petroleum and Chemical Industry Association. With exports amounting to less than US$50 billion, the oil and petrochemical trade deficit was more than US$30 billion. Of the total for imports, US$35 billion to US$40 billion was for crude oil. Given that China imported 123 million tonnes of crude oil last year, the cost per barrel was about US$41.30. As domestic crude oil production increased 2.9 per cent last year, the nation's reliance on foreign oil has risen to 41 per cent from 35 per cent in 2003. The reliance is expected to surpass 50 per cent by 2010, when imports are estimated to reach 200 million tonnes. 'Given the strategic nature of oil, it is quite likely that the next war will be triggered by countries fighting for oil,' Mr Tan said. To address energy security concerns, Beijing is expected to implement more measures this year to encourage conservation of energy and resources, after Premier Wen Jiabao outlined policy directions in his work report to the National Peoples Congress last week. Unit fuel consumption of heating equipment in buildings is three times as much as that of developed countries with a similar climate, while the compliance rate to energy conservation guidelines issued nine years ago was less than 10 per cent, according to Vice-Minister of Construction Zheng Yijun. Apart from conservation, developing clean alternative energy sources is also a priority. With the world's third-largest proved coal reserves, China is building a 24.5 billion yuan plant in Inner Mongolia to turn coal into liquid fuel, the first such plant in the country. Project builder Shenhua Group has signed letters of intent to co-operate with Royal Dutch/Shell and South Africa's Sasol on the technology front. 'The technology is very complex and its competitiveness depends on oil remaining on a relative high level,' Mr Tan said. 'But given the size of our country, this could be a way out to solve our energy problems ... one day we may become a technology leader in this field.' He said coal could also be turned into methanol, which could replace petrol, or turned into petrochemical raw materials such as ethylene and propylene. The association, of which the nation's three state-controlled oil companies - PetroChina, China Petroleum & Chemical and CNOOC - as well as more than 300 other companies are members, is pushing for greater participation of private firms in the oil and petrochemical sector. The central government issued a circular last month, officially encouraging private investment in the oil and gas industry. But Mr Tan said given the huge capital outlay required in the upstream segments of exploration, production and refining, most private capital would end up in the downstream production of fine chemicals used in the food and pharmaceutical sectors. 'For upstream projects, the question is whether banks are willing to lend to entrepreneurs given the big risks,' he said.