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Buy Excel files - histories and forecasts of production and wells split into any category for all countries and regions
Vertical axis in chart corresponds to thousands of barrels of oil equivalent per day.
Oil - fossil oil produced from on and offshore reservoirs, including tight sands/shales; and liquids extracted from gas.
Gas - sales gas produced from on and offshore reservoirs, including tight sands/shales and coal beds.O
Full breakdowns are available in datafiles.
Vertical axis in chart corresponds to number of wells spudded in year including stand-alone sidetracks.
Wells in chart include those drilled in exploratory and development categories for oil and gas, but excluding CBM.
Full breakdowns are available in datafiles.
China first produced significant quantities of oil (from the Yumen fields in Gansu Province) in 1939. The Karamay fields in the Junggar Basin in Xinjiang Province began to be exploited in 1956 with exploration of the Songliao basin in northeast China beginning in 1958. In 1959, Songji-3, the first oil well in the region, was drilled in the southern part of the central basin in Heilongjiang Province and the Daqing oil field, China’s largest field, started producing from here in 1960.
Petroleum exploration of the Bohai Bay basin had commenced in 1955. In 1962 the large Shengli field in Shandong Province came onstream followed by the Dagang field in Hebei Province and the Liaohe field in Liaoning Province in the mid 1960s. By 1970 production from Daqing, along with lesser quantities from these and other fields in the Bohai Bay Basin, the Ordos Basin, the Qaidam Basin, and the Sichuan Basin, had surpassed 600,000 bbls per day. The country had also begun to export oil to Japan. Meanwhile in the early 1960s the first parts of a gas infrastructure were installed in the populous northeast of the country to make use of associated gas production.
After 1970 exploration and production activity increased rapidly with oil output rising to a peak in 2010 at over 4 million barrels per day. Gas production grew to nearly 140 bcm a year and is still rising. Drilling numbers have increased even more rapidly with the country now capable of drilling over 20,000 wells a year. Only 1500 wells were drilled in 1970 and a little over 8000 in 2000. About 2% of current drilling is offshore.
Production from Daqing had grown to over 1 million barrels per day by 1978 and this stayed steady until persistent decline began around 2000. The Shengli, Liaohe and Dagang fields together managed to surpass a million barrels per day in the 1980s but are now also slowly declining. Other significant accumulations found after 1970 in the northeast include the Huabei field located on a plateau in the central section of Hebei Province and the Zhongyuan field located on the border of Shandong and Henan Province, both discovered in 1975.
The Sichuan basin, where modern wells were first drilled in 1953, began producing gas in 1969 and the region is now the largest gas producer in China closely followed by the Ordos and Tarim Basins. New gas fields are still being exploited in Sichuan including Puguang and Yuanba and most recently Chuandongbei, which are all sustaining exports from the region.
The Changqing gas field, located in the Ordos Basin, is the largest gas field in China. It came onstream in 1995 and also produces substantial volumes of oil. Gas production from this one field peaked at nearly 20 bcm a year in 2015. Concerted gas exploration in the Tarim Basin did not begin until 1989 although some oil had been produced here since 1974. CNPC conducted comprehensive exploration between 1989 and 1995 growing output to around 16 bcm a year by 2008.
Other smaller oil and gas fields have been developed in western China. The northwest margin of the Junggar Basin has been productive since the discovery of the Karamay group of fields in the 1950s. Along with these remote producers in Xinjiang Province, the Turpan-Hami fields, onstream in 1974, deliver oil from the southern part of this basin as does the Cainan field, discovered in 1991 and put onstream in 1995. Despite intense exploration and development activity in recent years most of these fields are at plateau or declining.
Around 25% of China’s oil production and 14% of its gas production originates from offshore waters of which over half of the oil comes from Bohai Bay. Here offshore production began in 1977 and around 70 fields produce in shallow and very shallow waters, the largest being Penglai 19-3 which came onstream in 2002.
Further south a few fields produce oil and gas in the East China Sea, the first being Pinghu from 1998. In the more prospective South China Sea the Pearl River Mouth delta has over 30 producing oil and gas fields. Production started from this region in 1991 and peaked at around 400,000 bbls per day in 2005.
The bulk of China’s offshore gas comes from the South China Sea, onstream from 1993. The Yacheng 13-1 field lies in the Yinggehai Basin west of Hainan Island and is the largest offshore gas field in China. It came onstream in 1996 followed by the nearby Dongfang 1-1 field onstream in 2003. They supply gas to Hong Kong and Hainan.
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Oil and gas have been found and used in China for at least 2 millennia. During the Han Dynasty wells in Sichuan Province were hand dug to at least 200m in order to access brine with associated gas delivered in bamboo pipes to fuel fires to evaporate the brine for salt recovery.
Oil found in these wells (or in seeps elsewhere) was used in weaponry, medicine, lubricants, ink, and lighting. However, managed operations did not begin until the 1930s and it was not until the Communists had enforced stability that concerted exploration activity could begin.
Oil and gas forecasts
Through increased investment, application of improved technologies and fuel substitution, China has increased its oil production by 30% over the last 20 years. However, despite extensive EOR in its geologically complex reservoirs and intense drilling onshore in the old giant fields, such as Daqing, plus widespread exploration programs offshore (including in deep waters), the country’s output is now flat and probably will remain so for the next 15 years.
The Daqing field, for example, has seen a huge expansion in investment. In 2002, PetroChina drilled 1,975 development wells; in 2014 it drilled 4,498. However production declined by over a quarter and decline is expected to continue at around 3% each year. The heavy oil Liaohe oil fields have seen output stabilise due to steam and polymer flooding programs whilst the Jilin fields have been subjected to hydraulic fracturing with CO2 injection to slow decline.
Per well volumes from older fields are dropping and there is little chance of fully offsetting this natural decline over the long term, especially as periods of lower oil prices will lead to reduced spending. Although there will be intermittent up and down movements in production volumes beforehand, it is inevitable that China’s oil production will begin to persistently decline after 1930. Even with new LTO production, which we forecast will begin soon, declines are expected to average 2.5% each year.
The potential for output growth in China is not helped by the rigid structure of its industry relative to the many risk-taking companies in the USA which exploit opportunities wherever possible (and suffer the consequences of lower oil prices). Nevertheless investment in infrastructure in the remote northwest has enabled considerable growth in output from the Tarim and Junggar Basins in Xinjiang Province. Conversely offshore, independent oil companies have provided capital and expertise but exploration of the shallow waters of the relatively well-explored Bohai Bay led by CNOOC has seen the most growth.
Meanwhile gas production has increased by nearly 600% over the last 20 years as demand has surged and the country has tried to reduce the share of coal it uses and hold down gas imports. An extensive new pipeline infrastructure has been built to deliver gas from central and west China to the populous east. And in the northeast, with technical assistance from Total and Shell, CNPC is developing tight gas in the Ordos Basin’s Sulige and Changbei fields. China has also begun to develop shale gas in the Sichuan and Tarim Basins and coal bed methane.
Although progress has been slow (due to a combination of lack of technical expertise and a shortage of water), we forecast that up 50% of China’s gas will be from tight reservoirs or coal beds by 2030 and that the country will be producing more than double the amount of gas it could manage in 2010 although by 2040 the beginning of decline is expected.
To meet burgeoning demand for oil and gas, Chinese companies have sought to secure stakes in, amongst other places, the Middle East and East Africa and they are involved in the construction of long distance gas pipelines from China to Central Asia and Siberia. China is well aware of the long term limitations of its indigenous energy, especially as climate change and pollution issues are forcing a pull-back from coal. It is growing its renewables supplies faster than anywhere.