Dec. 7 (Bloomberg) -- China, the world's second-biggest oil user, may cut imports of fuel oil by as much as 11 percent this year because of rising purchasing costs and falling demand from non-state-owned refineries, PetroChina Co. said.

Imports may fall to between 25 million and 26 million metric tons this year, compared with 28 million tons in 2006, Sun Yufa, vice president of PetroChina Fuel Oil Co., the fuel oil unit of the nation's biggest oil company, said in an interview in Beijing today.

Asian fuel oil prices have gained 66 percent this year, boosting raw material costs for power utilities and privately owned processing plants. China's so-called teapot refiners have shut units as processing fuel oil into diesel and gasoline becomes unprofitable because China controls energy prices to curb their impact on inflation.

``Some teapot refiners in Shandong province have suspended operations as they can't make any money,'' Sun said at a conference organized by the International Petroleum Economics magazine. ``Some power plants in Guangdong are shifting to natural gas on rising fuel oil costs.''

The International Petroleum Economics is a publication owned by China National Petroleum Corp., the parent of PetroChina.

The country's fuel oil demand may fall at least 4 percent this year to below 46 million tons, Sun said.

``Consumption is declining because consumers such as power utilities are seeking alternative sources because of rising costs and a government policy to save energy and cut pollution,'' he said.

Supply Order

China Petroleum & Chemical Corp. and PetroChina Co. are asked by the government to supply about 1 million tons of crude to privately owned small refineries to help boost oil-product output, Platts reported yesterday.

China is battling its worst fuel shortages in more than two years as demand rises in an economy that expanded 11.5 percent in the third quarter.

``The government's order to supply crude oil to small local refineries will further cut the demand of fuel oil,'' Sun said.

Fuel oil use in Shandong and Guangdong account for almost 90 percent of the nation's total, according to Sun.

China plans to have 420 million tons of annual refining capacity by 2010, Zhang Fuqin, head of refining and petrochemicals at PetroChina's Planning & Engineering Institute, said today.

The nation needs to add 82 million tons of refining capacity by 2010 to meet a government target, she said.

China will focus on importing crude oil from the Middle East and Africa, Zhang said. ``If there aren't any significant discoveries, China's dependency of crude imports may reach 73 percent by 2030.''

Only the U.S. consumes more energy than China.

To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net.

Last Updated: December 7, 2007 06:35 EST