China Hopes to Produce 193Mt of Oil and 92Bcm of Natural Gas by 2010

April 20, 2007 Filed Under: Oil and Gas  

China aims to produce 193 million tonnes of oil and 92 billion cubic metres of natural gas by 2010, according to an energy blueprint released by the National Development and Reform Commission (NDRC) on April 10.

While the target represents a mere 5% growth in oil output compared to last year, or 2.12% in annual growth, the gas target represents a 56% jump in natural gas production, necessitating growth of 12.6% a year.

The country’s top economic planner also said that it aims to make crude oil account for 20.5% of the country’s total energy consumption by 2010, down 0.5% from 2005. Natural gas usage is to increase during this period, accounting for 5.3% of consumption by 2010, almost double the 2.8% figure it represented in 2005.

The world’s second-largest energy consumer produced 184 million tonnes of crude oil and 59 billion cubic metres of gas in 2006.

Coal will remain China’s dominant form of energy in 2010, accounting for 66.1% of all energy uses, 3 percentage points lower than the 69% seen in 2005.

The NDRC explained that China’s use of coal in 2005 was 42 points higher than the world average, and that such widespread use of the fuel is leading to environmental problems.

China sees natural gas as an ideal alternative to other fossil fuels. However, limited domestic production and reserves, as well as high global prices for the gas caused by the surge in crude oil prices, has hindered its growth.

The NDRC also said that China will offer preferential policies to encourage oil and gas exploration. The country will also require oil enterprises to help build strategic oil reserves as well as participate in a commercial oil reserve scheme.

A modern coal trading market will be also established between 2006 and 2010, according to the NDRC.

Crude Oil Pipeline

The crude oil pipeline linking resource-rich Xinjiang Autonomous Region’s Urumqi and northwestern Gansu Province’s Lanzhou, with an annual transmission capacity of 20 million tonnes, will be ready for commercial operation in June this year, state media reported today.

The pipeline will help transport crude oil produced in Xinjiang, which is home to 30% of China’s onshore oil reserves, as well crude oil imports from Kazakhstan through the Sino-Kazakh crude pipeline that went into operation in May last year to supply oil-poor central and southwestern regions, according to state-run Xinhua news agency .

It was reported by state-backed China Petroleum Daily’s online portal earlier in the month that a new pipeline is currently being planned from Lanzhou to Sichuan Province’s Chengdu at a cost of RMB 3.53 billion ($457 million), in part to feed the proposed oil refinery of China National Petroleum Corp. in the province’s Pengzhou City.

The West China Pipeline Project, which includes the Urumqi-Lanzhou crude pipeline and an oil product pipeline, started construction in March 2005 with a total investment of RMB 15 billion ($1.94 billion). It is so far the country’s longest pipeline with the largest transmission volume.

The 1,842-kilometer oil product pipeline, with an annual transmission capacity of 10 million tonnes, went into operation in October last year.

Xinjiang ranked as China’s third largest oil producer last year with 25 million tonnes of output. It is expected to produce 35 million tonnes annually by 2010. With the 10 million tonnes imported from Kazakhstan, the region will supply one-fifth of the country’s oil demand by then.

CNOOC

The China National Offshore Oil Corp. (CNOOC), the country’s leading offshore oil producer, announced late yesterday that its oil and gas output from northern China’s Bohai Bay reached 15.6 million cubic metres last year.

The figure represented an increase of over 56% compared to its 2004 output, the company claimed.

By 2010, CNOOC aims to produce 25 million to 30 million cubic metres of oil equivalent in Bohai Bay annually, nearly double the amount it produced last year.

“It is clear that the Bohai Basin will continue to be a focus in China’s offshore oil and gas exploration efforts,” associate research fellow with the Ministry of Land and Resources, Pan Jiping, said earlier this month.

Although oil and gas prospecting within the region has accounted for 29% of its potential reserves, the region is still considered to be in the early stages of development as it falls below the 30% development benchmark, Pan explained.

PetroChina, the listed arm of the China National Petroleum Corp., the country’s largest oil and gas producer, recently made a large discovery in the Bohai Basin. Although the company announced that it had discovered the nation’s largest oil find in a decade, it is yet to reveal detailed reserve figures for the find.

CNOOC Ltd., CNOOC’s listed arm, produced 167 million barrels of oil equivalent of crude oil and gas last year, while PetroChina’s oil equivalent production reached 1,059.4 million barrels.

CNPC

China National Petroleum Corp. (CNPC), the country’s largest oil and gas producer, will build a 10 million-tonne oil refinery in the southwestern Chinese city of Chongqing, the municipal government said on its website today.

According to the report, the oil giant is still deciding between the two districts of Changshou and Wanzhou. The refinery will start processing crude oil in three years.

Chongqing has also reportedly been chosen as the destination for the long-touted Sino-Burma oil pipeline, with construction on the pipeline potentially beginning within the year, which could serve as a crude oil source for the proposed refinery.

The move came shortly after the oil giant struck deals with nearby Sichuan Province and Guangxi Autonomous Region to build large-scale oil refineries and chemical plants, marking its further penetration into the downstream oil business, traditionally dominated by rivals China Petroleum and Chemical Corp. (Sinopec).

CNPC’s expansion into the sector was driven by robust demand for fuel and chemical products in the region, and its abundant upstream resources and accumulated capital would help feed the refineries with crude oil supplies, according to analysts.

It is also likely that the government will adopt a new oil product pricing scheme within the year that guarantees decent profit margins for refineries.

China’s southwestern region currently does not have any sizable refineries due to its lack of oil resources.

The Guangxi refinery will mostly process crude imports from CNPC’s Sudan oilfield, while the refinery in Sichuan is likely to take advantage of resources from western regions such as Xinjiang Autonomous Region, one of China’s largest oil producers.

China’s petrochemical industry recorded rapid profit growth last year, hitting RMB 437.7 billion ($56.7 billion), up 18.3% from the previous year, on the back of soaring market demand driven by a runaway economy.

© Interfax-China 2007.