technical expertise. These acquisitions/investments have been
largely made through the three primary national oil companies
(NOCs) – Sinopec, CNPC/PetroChina and CNOOC. Not including the
huge bilateral oil‑for‑loans deals, according to data from Derrick
Petroleum, these three NOCs have invested almost US$ 150 billion in
overseas oil and gas assets since 2005.
3
Internally to increase domestic supply and reduce import
dependency, the government intends to focus more investment on
domestic upstream oil and gas and on renewable energy projects,
and is looking for ways to attract more private investment into
the upstream sector by streamlining the project approval process,
implementing policies to open and expand the transmission
infrastructure, and implementing some pricing reforms.
4
The next
two sections discuss China’s oil and gas upstream in greater detail.
China’supstream: statusandprospects
Chinese oil reserves at the beginning of 2014 were 24.4 billion bbls,
while conventional reserves of natural gas stood at 155.4 trillion ft
3
.
In 2013, China was the world’s fourth‑largest oil producer, with
production estimated at 4.2 million bpd. Natural gas production
in 2013 was estimated at 3.8 trillion ft
3
.
5
Neither oil nor gas production
in China is keeping pace with demand growth, so the country remains
a large (and growing) net importer of both oil and gas.
Conventional forecasts of Chinese oil production, such as from
the US Energy Information Administration (EIA), see rather modest
oil production growth – averaging around 0.5% per year and peaking
in 2030 at approximately 4.9 million bpd. EIA expects production
growth to fall far short of oil demand growth, and China’s oil import
dependence to rise. Chinese oil demand is expected to grow from
around 10.6 million bpd in 2013 to 16.6 million bpd by 2030 and to
19.8 million bpd by 2040.
6
EIA’s forecast of Chinese gas production is
more aggressive – almost 5% per year growth out to 2040. There are,
however, concerns around Chinese gas production, particularly related
to shale gas development, which will be further discussed later in this
article. Even with an optimistic view of Chinese gas production, as with
oil, given the expected increases in gas demand (rising from about
4.7 trillion ft
3
in 2013 to 17.5 trillion ft
3
by 2040), China is expected to be
an increasing net importer of natural gas.
7
Current Chinese oil production is more than 80% onshore, with
the remaining portion coming primarily from shallow offshore
developments. China’s oldest and most prolific onshore oilfields
are located in the Northeast and North Central regions (notably,
the Daqing and Shengli fields), while production in the interior
provinces, the Central Ordos Basin (especially the Changqing field)
and the western Tarim and Junggar Basins, has been growing
relatively strongly in recent years. Apart from some new prospects,
primarily in the western regions, China’s onshore oilfields are
however, largely considered mature, albeit with substantial
enhanced oil recovery activity (EOR – water or polymer injection
and/or steam flood).
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