China faces huge challenges in oil and gas supply in the ongoing energy transition that is propelled by the target to achieve net carbon zero by 2030 and carbon neutrality by 2060, said a senior energy official.
Li Guoxin, vice president of the exploration and gas division of PetroChina, told the audience attending cippe 2021 in Beijing this week that energy security is a precondition of and the basis for the process of realising carbon neutrality.
“The role of oil and gas is not replaceable or unshakable,” he said.
Li argued that the net zero and carbon neutrality targets run hand in hand with the strategy to increase gas production while stabilising oil output.
“You will be held responsible when tanks and airplanes run out of oil,” he said, adding that oil and gas will remain “very important” over the next 10 to 15 years.
He said his company is implementing the strategy to expand exploration and production in the east, develop that in the west, approach offshore, stabilise oil production, increase gas output and promote renewables.
He referenced Xi Jinping as saying the nation should go all out to crack key technology in oil and gas exploration and development when the Chinese president addressed a national science conference two weeks ago.
He Jiankun, deputy director of National Expert Committee on Climate Change, said that while additional energy demand from now till 2030 will be met by renewables, unconventional oil and gas is of strategic importance for China to ease any possible supply crunch while promoting low carbon development.
China is rich in unconventional hydrocarbon resources, with 28.3 billion tonnes of shale oil in place and 13.4 trillion cubic metres of shale gas and coalbed methane in place, which will be a focal point for China in the future, he said.
He also defended additional oil and gas exploration and development given that over the last five years China has significantly reduced coal demand thanks to the increase of gas production.
PetroChina in 2020 posted a steep rise in domestic oil production, contributing to more than half of the country's total oil output.
The company's crude output from domestic fields last year reached 102.25 million tonnes — equating to about 2.45 million barrels per day, compared with 2.035 million bpd in 2019. Gas production last year hit 130.3 billion cubic metres, up by 11.6 Bcm from 2019 and accounting for 70% of the country’s total gas output.
In contrast, China's coal production last year increased modestly by 0.6% to 3.9 billion tonnes.
However, Li cautioned that technical challenges and high production costs could hamper shale gas development. He said conventional technology is beyond the scope required to tap shale gas reservoirs characterised by complex geology and lower permeability.
“Without cutting the cost, it will be difficult to develop shale gas,” he admitted without giving the cost of shale gas production.
About 80% of such new discoveries are trapped in reservoirs beyond 3500 metres, which poses serious challenges for China to develop given the technical constraints.
The shale reservoirs are more fractured than those elsewhere, leading to challenges in maintaining well integrity while drilling, which also helps to explain the exit of international oil and gas majors from China’s shale sector after poor results.
In part due to the challenges in producing shale gas from deeper reservoirs, China last year only produced 20 Bcm of shale gas last year, missing its 2020 output target of 30 Bcm.