Page 9 - AsianOil Week 03

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China's crude balance
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Production
Imports
Data: GAC, NBS
Indeed, while CNPC noted that it had man- aged to reverse a four-year decline in oil produc- tion last year, it said gas production had grown by 8.6% year on year – its fastest pace in five years. It did not provide exact figures for 2019’s output,
New supply streams
In order to improve production figures, Chi- na’s oil and gas developers have begun look- ing beyond the mature fields in the east of the country.
CNPC pledged in July 2018 to invest CNY150bn ($21.76bn) in the remote northwestern region of Xinjiang by 2020 to boost the local energy industry. While it is not clear how much of that fig- ure the company has realised, CNPC’s subsidiaries have been drilling more expensive wells in pursuit of new reserves in Xinjiang’s Tarim Basin.
CNPC said on January 20 that it had hit both oil and gas at an ultra-deep well in the basin. The company said the Luntan One well, which at 8,882 metres is Asia’s deepest onshore well, dis- covered oil and gas reserves below the salt layer. CNPC said output was expected to hit 133.46 cubic metres (839 barrels) per day of oil and 48,700 cubic metres per day of gas.
“The depth of the newly discovered well is rare. Oil and gas wells in China mainly range from 200 meters to 5,000 meters [in depth],” the official Global Times quoted an unnamed petro- leum engineer as saying.
The news of the discovery comes six months after CNPC announced it had finished drilling the well. The company, which started drilling in June 2018, had to overcome challenges such as ultra-high-temperature and ultra-high-pressure conditions as well as a high sulphur content.
Luntan One is not an anomaly, however, and appears to be part of a trend of more adventur- ous exploration efforts by the country’s upstream players. The ultra-deep well actually broke Sin- opec’s record of 8,588 metres that the company set with the Ying-1 well at the Shunbei oil and
gas field in Tarim in February 2019. Two weeks prior to Ying-1, Sinopec drilled to a depth of 8,520 metres at the 5-5H well on the same field.
CNPC unit PetroChina, meanwhile, revealed in October that a production test at its Bozi-9 well in the same basin had yielded flows of 418,200 cubic metres per day of natural gas and 115.15 cubic metres of condensate from a res- ervoir that was 8,000 metres below the surface.
At its annual work meeting last week, CNPC projected that the combined natural gas produc- tion capacity of its Tarim Oilfield and Southwest Oil and Gas Field units would exceed 30 bcm this year. Shale gas production, meanwhile, is expected to top 11bcm. Output by Changqing Oilfield is projected to reach 57.01mn tonnes of oil equivalent (1.14mn boepd) in 2019, includ- ing 41.23bcm of natural gas.
What next
China’s drillers are plumbing ever deeper reserves in the hunt for hydrocarbons and this is a trend that is likely to continue in the coming years.
The government has unveiled plans to allow foreign and private companies to explore and develop the country’s oil and gas resources without the need for partnerships with state-owned developers. While the move is not expected to trigger a major new wave of foreign investment, small-scale developers and oilfield service providers may find tempt- ing new opportunities
As the majors allocate resources towards ultra-deep well depths in the west of the country, they may well lose interest in older, less produc- tive fields in the east. Afterall, CNPC and Sin- opec shut in fields following the 2014 oil price crash, deeming these smaller and more mature assets to be uneconomical. Independent players entering the upstream space may be tempted to step in and take over end-of-life fields that still present value at a time when the state developers are searching for major new discoveries.v
Week 03 22•January•2020 w w w. N E W S B A S E . c o m P9
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