Analyst: Chinese Liquids Production to Decline Within a Decade

While China has been producing significant quantities of oil for several decades, an analyst projects declining liquids production within a decade.

Parul Chopra, a partner at Rystad Energy, said many of the existing fields in China have matured.

“They’ve been producing quite significant oil for several decades now,” he said. “They have explored a lot of the onshore areas already.”

Because they have “discovered all the easy-to-discover resources and they have huge energy needs; they are promoting international companies to come and explore onshore and offshore areas,” he continued, “but interest has not been that good.”

In July, CNOOC announced there were 13 blocks available for bid offshore China, including acreate in Bohai Bay and the Pearl River Mouth and Yinggehai Basins. Bids are due Feb. 28, 2023.

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Offshore activity is dominated by CNOOC, he said, although ConocoPhillips has some operations offshore. Much of the offshore activity is in Bohai Bay and the Pearl River Mouth.

In reporting its 2021 results, CNOOC said it had 22 commercial discoveries last year, although some were not in China, such as the Exxon Mobil-operated Stabroek find off Guayana.

Offshore China, CNOOC found four medium-to-large oil and gas fields. During the year, CNOOC brought 14 new projects onstream. CNOOC said that in 2021, Bohai oil fields became the largest crude oil production base in China. 

Operators are spending close to $10 billion a year on offshore oil and gas activity, he said, but onshore spending is “much more.”

Onshore activity

Key onshore players in China include PetroChina and Sinopec, and Shell has some tight gas operations onshore, he noted. 

Onshore activity is greatest in the Ordos, followed by the Sichuan Basin, he said. And output onshore is expected to plateau given that there are no known major projects expected to come online. Further, he estimated as much as two-thirds of production comes from mature fields, which requires infill drilling just to keep production levels flat.

PetroChina has been “spending a lot of money” on infill drilling since 2015, he said. 

In PetroChina’s announcement of 2021 operating results in March, the company said it had made major breakthroughs and discoveries in the Ordos, Tarim, Junggar and Sichuan basins. It also cited reaching a domestic oil and gas equivalent reserve replacement ratio of 1.47 and reaching a domestic crude oil reserve replacement ratio of 2.21.

"[China has] discovered all the easy-to-discover resources and they have huge energy needs; they are promoting international companies to come and explore onshore and offshore areas, but interest has not been that good." – Parul Chopra, Rystad Energy

PetroChina said it adhered to the strategy of “stabilizing oil and increasing gas production” and facilitated stable production in mature oil and gas fields and efficient production capacity build-out in three new areas, resulting in growth of both domestic oil and gas productions.

In Sinopec’s 2021 annual report, the company reported 16 commercial discoveries and a number of new breakthroughs in shale oil exploration. The company also reported adding 167 million tonnes and 268 Bcm of new proven reserves, 203 million tonnes and 422 Bcm of probable reserves and 635 million tonnes and 541 Bcm of possible reserves.

Chinese oil production from 2021 to 2030 will likely be relatively flat before eventually declining, Chopra said. Chinese oil production is currently about 4.5 MMbbl/d, expected to fall to 4 MMbbl/d by 2030, he said.