China’s efforts to increase exploration and development activity have paid off, with with fresh investment over the past two years significantly boosting the country’s producible hydrocarbon reserves.

The National Energy Administration (NEA), the country’s energy watchdog, said at a recent internal meeting that E&P investments in 2019 increased by 22% year-on-year to 332.1 billion yuan ($47.5 billion).

The increase has helped identify an additional 8.82 billion barrels and 1.4 trillion cubic metres of natural gas reserves, up by 25% and 68%, respectively, from 2018.

Crude production hit 1.4 billion barrels last year — or 3.82 million barrels per day — up from 1.39 billion barrels recorded in 2018 and reversing the falling trend that started eight years ago.

Last year also saw China’s natural gas production increase to 173.3 billion cubic metres, 1.4% above target, and up from the 161.8 Bcm recorded in 2018.

Sources said domestic production last year could only meet about 54% of the country’s gas demand due to the campaign to switch to gas from coal in line with the government's much-vaunted blue-sky policy.

The government wants gas to account for 10% of the energy mix by 2020 — up from around 7.8% in 2018 — before rising to 15% in 2030.

The increased activity last year forms part of a larger government plan to revitalise the country's lacklustre upstream sector.

Under the seven-year master plan from 2018 to 2025, the government wants crude production to climb back to 1.47 billion barrels per annum by 2025.

Onshore, China has been struggling with natural decline at mature fields in the Songliao basin in the country’s northeast, where the giant Daqing field is located.

Additional efforts will be made to boost production off Bohai, and onshore Xinjiang, Sichuan and Ordos — the four basins typically earmarked by China as the main areas for future hydrocarbon production increases.

At Bohai Bay, state player China National Offshore Oil Corporation (CNOOC) is developing the Bozhong 19-6 field, discovered in 2017 in water depths of 24 metres, hitting total oil pay zones of 25 metres and gas pay zones of 348 metres.

CNOOC claims the Bozhong play as one of two new huge discoveries in Bohai Bay, the second of which is Bozhong 29-6.

Much of the exploration investment has targeted the onshore sector, especially in frontier areas such as the Tarim and Ordos basins in Xinjiang, Shaanxi and Inner Mongolia.

Exploration in the Ordos basin, operated by state giant China National Petroleum Corporation (CNPC), has led to the discovery of the Qingcheng oilfield.

CNPC estimates the field holds about 7.35 billion barrels, and in the short term the company plans to establish an annual production capacity of 22.05 million barrels.

China is gripped with concerns over national energy supply security amid its rising demand and dwindling production — a trend that has led to the country overtly relying on imports to sustain domestic energy consumption.

Exploration

China E&P investments on the rise