China has become one of the most emerging markets in oil and gas. It is one of the top 15 petroleum-rich countries consisting of 905 billion barrels of oil reserves and 3189 Trillion cubic feet of gas reserves. In 2016, China had reached reserve/production ratio of 30.4 and 11.9 natural gas and crude oil respectively. The demand for oil and gas is expected CAGR of 1.4% and 5.5% respectively by 2024.
The demand for crude oil expected to 6.45 Billion bbl (Bbbl) in 2024 from 3.96 Bbbl in 2015. Also, the demand for gas is expected to increase from 6.7 Trillion cubic feet (Tcf) to 10.9 Tcf in 2024. Considering the domestic production of oil around 4 million barrels per day, China is highly dependent on the global market of supply. In 2015, China imported 6.7 million of barrels per day which indicated that China reliance on oil importation is more the 60%. It is forecasted that by 2020, China’s crude oil consumption will be 12 million of barrels per day and by 2030, 80% of China’s crude oil dependency will be on importation.
Ministry of China is sparing no efforts in the search for new resources. Considering recoverable shale gas reserves and the gas which were commercially produced, China has total shale gas reserves of 4.6 Tcf. Total recoverable coal bed methane is 10.8 Tcf and total recoverable conventional natural gas is 1.79 Tcf.
Key Product Categories & Technologies
Gasoil is the most consumed product in China. Major consuming sector of gasoil is transportation -up to 70% and the remainder is consumed by other industries like construction, farming, fishing and power plants. An increase in net import of LNG has been observed due to uplift in demand. Demand for gasoline has increased by around 21.6% year to year in 2015 due in growth in automobile industry
China has made a significant progress in the development of oil and gas production technologies. Before 66 years, China, from a country lack of oil, has become the 4th largest oil producer in the world in 2014. China has mastered several technologies and found the key to challenges which turned out to be a great success. China National Petroleum Corporation and Shell in 2014 have worked on geological modeling, geo-steering to drill bilateral horizontal wells. Also, CNCOOC has worked with ConocoPhillips and Husky to develop new technologies for offshore exploration and deep water gas fields. The implementation process of ASP flooding to enhance oil recovery was adapted by Daqing oilfield for better oil recovery by 10-15%.
Top Players & Company Share
China’s oil and gas market prominent companies are Yanchang Petroleum, China National Offshore Oil Corporation (CNOOC), Sinopec and PetroChina. Major contribution in oil and gas market in China is by Sinopec contributing 46% of total crude refining capacity. While PetroChina accounts for 31% and remaining is processed by smaller refineries. CNOOC focuses on offshore oil development and has a limited refining capacity.
Growth Drivers & Restraints, Major Trends and Issues
China’s Crude oil price is coupled with global market prices. China’s current taxation policies and development plans are creating a favorable environment for collaboration of international oil and gas companies with China. This will encourage them to participate in the development of oil and gas resources. China oil and gas companies are also bidding overseas projects, mergers and acquisition which smaller companies.
Competitive Dynamics & End market mix
China is facing a lot of challenges since the global prices continue to remain above domestic production prices. Considering current crude oil prices, China National Offshore Oil Corporation (CNOOC), Sinopec and PetroChina were forced to reduce production of their high-cost fields. In 2016 Sinopec and CNOOC reduced its capital expenditure 45% and 10% respectively.
Despite global low oil prices, China a positive effect on its economy. Expenditure for oil imports in 2015 41% less than a year before, as Chinese government filled its strategic petroleum reserves with low-priced crude oil.
China is expected to become a major importer of LNG in the world and US companies are expected to have opportunities to export LNG to China.
In 2016 China has processed 10.83 million barrels per day which are 33% surplus of capacity. Due to their current taxation policies and development plans, many international companies are looking forward to collaboration with Chinese companies.
The Chinese government is keen in using cleaner sources of energy and thus it had reduced price of natural gas for non-residential users. This will lead to falling in domestic production of natural gas and will cause an uplift in demand for natural gas. Import of LNG is expected to rise and so there will be ample of opportunities in China for foreign companies. Higher imports of crude oil are expected after 2017 due low domestic production and weak global prices.
Exports of refined products are expected to rise from 3.04 million MT, in 2016 by 1% year on year.
- Market growth drivers
- Top players
- Global regional insights
- Technology outlook
- Oil and Gas
- Upstream and downstream.