Petroleum industry in China
The impact of the
History
Early history
The late Qing dynasty banned mining because of the traditional cosmological beliefs which regarded the land as a sacred legacy.[5]: 7 This ban was lifted during the modernization effort of the Self-Strengthening Movement as the Qing dynasty sought to develop a modern navy and modern industry.[5]: 8 In 1875, the court designated Cizhou (in what is now Hebei province) and Taiwan as testing grounds for oil extraction.[5]: 8 Qing attempts at oil exploration were hampered by corruption, low efficiency, and lack of sufficient domestic investment capacity for oil extraction and transportation.[5]: 8 The Qing court was also concerned about foreign investment and the perceived risk of selling the country to foreigners.[5]: 8
Nationalist Era
In the 1930s, gasoline replaced kerosene as China's most important petroleum product.
In 1949, the
Early PRC
Ensuring adequate energy supply to sustain economic growth has been a core concern of the Chinese government since 1949.[6]
China's First Five-Year Plan emphasized industrial development, including nationwide geological prospecting and surveys to support that development.[5]: 19 These prospecting efforts were led by the Ministry of Geology and the Ministry of the Petroleum Industry.[5]: 19 On August 1, 1952, a division of the People's Liberation Army was turned into China's first petroleum army and its eight thousand soldiers became the core workforce for petroleum exploration, construction, and drilling.[5]: 21
Using primarily resources from the Yumen Oil Field and Tsinghua University, the Beijing Oil Institute was founded on October 1, 1953.[5]: 21
In 1956 a rail link was built to Lanzhou; until then, the oil was transported out by truck. A pipeline was constructed in 1957. The Yumen refinery was enlarged and modernized, and by the late 1960s it was reported that production from that area was "about two million tons".[7]
The development and construction of Karamay oilfield strongly supported the economic construction of the People's Republic of China in the early days after the founding of the People's Republic of China. In 1958, Qinghai Petroleum Exploration Bureau, based on the discovery of Lenghu structural belt by the Geological Department, drilled a high-yield oil well with a daily output of 800 tons in Lenghu No. 5 structure, and successively proved Lenghu No. 5, No. 4 and No. 3 oil fields. In Sichuan, a natural gas zone was discovered from Chongqing in the east to Zigong in the west and Xushui in the south. In 1958, the Ministry of Petroleum organized a battle in central Sichuan and discovered seven oil fields, including Nanchong and Guihua.
In 1959, large reserves were discovered in Songhua Jiang-Liao basin in northeast China and later several other giant oilfields were found.[8] The most important is the Daqing oil field in Heilongjiang that has been the backbone of Chinese oil production for many decades.[9] The Shengli Oil Field began production in 1968 and became the second largest oil field after Daqing.[5]: 105 Many of China's other major oil deposits were also discovered during the 1950s and 1960s, and these early PRC prospecting efforts led to an independent oil industry by the time the 1960s ended.[5]: 28
The first two years of the Cultural Revolution disrupted oil production and led to a major oil shortage in 1967.[5]: 159 Daqing was one of the first places to have order restored by the military, when in March 1967, the People's Liberation Army restored order there in March 1967 so that production could proceed.[5]: 159
Export era
In the late 1960s and the early 1970s, oil prospecting increased throughout the country and new fields were discovered in central China and northern China.[5]: 168 Beginning in 1968 and continuing through 1978, China's crude oil production rose sharply at an annual growth rate of 20% and China became a net oil exporter.[5]: 168
Following the outbreak of the 1973
Beginning in 1979 (and running through 1997), the Japan Bank for International Cooperation provided China with resource loans for several oil and coal development projects.[10]: 62 These loans totaled $140 billion.[10]: 62
Import dependence
By 1993, internal demand for oil exceeded domestic production, and China became a net oil importer.[11] China became dependent on imported oil for the first time in its history in 1993 due to demand rising faster than domestic production.[6] In 2002, annual crude petroleum production was 1,298,000,000 barrels, and annual crude petroleum consumption was 1,670,000,000 barrels.
In 2006, it imported 145 million tons of crude oil, accounting for 47% of its total oil consumption.[12][13]
By 2008, much of China's oil imports derived largely from Southeast Asia, but its growing demand forced it to import oil from all over the globe.
In 2013 the pace of China's economic growth exceeded the domestic oil capacity and floods damaged the nation's oil fields in the middle of the year. Consequently, China imported oil to compensate for the supply reduction and surpassed the US in September 2013 to become the world's largest importer of oil.[2]
Oil prices rose in early trade on February 6, 2023, after declining 8% in the week prior to January 31, 2023. Brent crude futures rose 0.2% to $80.10 a barrel and WTI crude futures increased 0.2% to $73.54 a barrel. The IEA predicts China will drive half of global oil demand growth this year and may prompt OPEC+ to reassess its output cuts. Russian product price caps took effect on February 5, 2023, but are expected to have minimal impact on overall supplies.[14]
Domestic production
A big role is played in China's oil endowment by its state owned oil companies, mainly China National Offshore Oil Corporation, China National Petroleum Corporation, China National Refinery Corp, and Sinopec.
Province started producing in 1960, and by 1963 was producing nearly 2.3 million tons of oil. Production from
In 2005 China began to take drastic measures with its internal oil reserve programs as domestic oil production in China supplied only two-thirds of its needs and the estimated consumption requirement by 2020 was about 600 million tons of crude oil.
Oil drilling platforms
The largest oil field in the
In 2010, oil blocks in Wushi oil field (off Zhanjiang, near Hainan) began to be auctioned to foreign companies, with CNOOC having the option to increase its stake to 51% whenever required.[17]
China's $1 billion oil drilling rig, the
Foreign production
This shift to dependence on foreign oil has changed the exploration and acquisition policies of China. China's oil need overwhelmed its internal capabilities.
The Chinese government is taking diplomatic action to improve their relationship with ASEAN states. According to a 2008 report, the Chinese government had to take extra strides to secure good relationships with its neighbors. Malaysia is a neighbor state that was often seen as in contention with China because of political differences. Yet, the relationship with Malaysia was symbiotic because of their large supply of oil and their need for security assurances from China. In 2008 Malaysia was the number one producer of petroleum in the South China Sea, and they account for over one half of the production in the region.[22]
Foreign acquisitions
By 2008, China owned less than 1 percent of the oil company BP, worth about $1.97 billion.[23]
Trade encouragement
The National Assembly of Pakistan has passed the Trade Dispute Resolution Bill, 2022 to help enhance the trust of foreign buyers in the country and provide a mechanism for exporters to file claims and complaints against their foreign clients. The bill aims to improve contract enforcement and Pakistan's ranking on the World Bank's Ease of Doing Business Index by establishing a comprehensive system for resolving disputes related to exports and imports, including e-commerce.[24]
Energy security
Strategic Petroleum Reserve
China has one of the world's largest strategic oil reserves. Global strategic petroleum reserves (GSPR) refer to stockpiles of crude oil held by countries (and private industry) for national security during an energy crisis.
By 2004 China was investing in its first national oil reserve base to avoid foreign dependence. There are three different provinces in which they are focusing. The first Zhoushan, Zhejiang Province, was built by Sinopec, China's largest oil refining company. The storage space is 5.2 million cubic meters says the National Development and Reform Commission.[25] Zhejiang was originally a commercial oil transfer base. Its coastal position makes it convenient for movement purposes, although it is at the same time vulnerable to offshore violence. The next reserve of interest In Huangdao or Qingdao, Shandong Province and the final Dalian, Liaoning Province. All of these reserves are coastal and with their creation comes vulnerability to possible coastal attacks. In 2007, United Press International journalist questioned energy security, as all three of the stock oil bases were within range of Taiwanese cruise missile attacks.[26] These stockpiling strategies, as well as the international acquisition companies, are state-run initiatives to combat supply disruption.
According to a 2007 article in
The planned state reserves of 475,900,000 barrels (75,660,000 m3) together with the planned enterprise reserves of 209,440,000 barrels (33,298,000 m3) will provide around 90 days of consumption or a total of 684,340,000 barrels (108,801,000 m3).[30]
Along with an emphasis on defensive oil stocks, there is a significant push to create an offensive oil acquisition program. In March 2018, as part of a bid to establish its position as an economic superpower, China introduced a new oil benchmark.[31]
Transportation
In 2004,
In 2009 China completed its first critical oil pipeline, the Atyrau-Alashankou oil pipeline (Kazakhstan–China oil pipeline) in Central Asia,[32][33]: 2–3 as part of a larger overall trade expansion with the Central Asian region which represented a trade volume of over $US $50 billion by 2013, up from $1 billion in 2000.[33]: 1
See also
References
- ^ "IEA Atlas of Energy". International Energy Agency. May 2018. Retrieved 13 January 2021.
- ^ a b "China overtakes US as the biggest importer of oil". BBC News. 10 October 2013. Retrieved 11 October 2013.
- ^ "Meet the Chinese Newcomers Staking a Claim to Global Oil Trading". Bloomberg News. 12 January 2016. Retrieved 14 January 2016.
- ^ "$20 is the new $40; The oil market", The Economist via Gale, vol. 418, 15 January 2016, retrieved 15 January 2016Gale number:8972
- ^ ISBN 978-0-674-26022-1.
- ^ a b Andrews-Speed, Philip (November 2014). "China's Energy Policymaking Processes and Their Consequences". The National Bureau of Asian Research Energy Security Report. Retrieved 5 December 2014.
- ^ Marvin Weller (1984), pp. 393–394.
- .
- .
- ^ ISBN 978-0-262-54482-5.
- ^ King, Byron (June 2005), "Investing in Oil: A History", The Daily Reckoning
- ^ a b "China's oil imports set new record". Bloomberg BusinessWeek. Archived from the original on 22 May 2011. Retrieved 2 February 2011.
- ^ "China's 2006 crude oil imports 145 mln tons, up 14.5 pct – customs", Forbes, archived from the original on 19 November 2007
- ^ "Global oil price update". 6 February 2023.
- ^ a b Heubeck, C.; Story, K.; Peng, P.; Sullivan, C.; Duff, S. (2004), "An integrated reservoir study of the Liuhua 11-1 field using a high-resolution three-dimensional seismic data set" (PDF), Seismic Imaging of Carbonate Reservoirs and Systems: AAPG Memoir, 81, Houston, Texas: 149–168
- ^ a b "Liuhua 11-1, South China Sea, China", Offshore-Technology, 30 March 2008
- ^ "Notification of First Batch of Blocks in Offshore China Available for Foreign Cooperation in Year 2010". www.cnooc.com.cn. CNOOC. Archived from the original on 21 September 2017. Retrieved 21 September 2017.
- ^ 11 May 2012, 南海钻井平台上工人直升机上下班, NetEase News
- ^ "Not the usual drill: Tensions mount dangerously in contested waters". Singapore: The Economist. 10 May 2014. Retrieved 14 January 2016.
- ^ "The Operation of the HYSY 981 Drilling Rig: Vietnam's Provocation and China's Position", Ministry of Foreign Affairs, the People's Republic of China, Beijing, 6 August 2014, retrieved 15 January 2016
- ^ Hoffmann, Fritz (18 October 2004), "China's Quest for Oil", TIME
- ^ "South China Sea and Natural Gas." Global Security. 2 April 2008 <http://www.globalsecurity.org>
- ^ a b Ponikelska, Lenka; Subrahmaniyan, Nesa (15 April 2008), "China Buys Stake in BP; Investment Is 'Welcomed' (Update2)", Bloomberg
- ^ "Trade encouragement for foreign investors". 7 February 2023.
- ^ Chang, Andrei. "Analysis: China's Fuel Oil Reserves." United Press International 21 December 2007
- ^ Chang, Andrei (21 December 2007), "Analysis: China's Fuel Oil Reserves", United Press International
- ^ "Suggested title: oil reserves (China)". China News. 19 July 2007. Archived from the original on 28 September 2007.
- ^ "Gulfnews: China plans to exploit weak energy markets". Archived from the original on 27 February 2009. Retrieved 8 January 2009.
- ^ "suggested title: Chinas Energy Security Strategy". China Sourcing Blog. October 2009.
- ^ "Countries Compared by Energy > Oil > Consumption. International Statistics at NationMaster.com". www.nationmaster.com.
- S2CID 234536503.
- Xinhua. 12 June 2006. Archived from the originalon 11 April 2009. Retrieved 15 March 2008.
- ^ a b Cooley, Alexander (18 March 2015). "China's Changing Role in Central Asia and Implications for US Policy: From Trading Partner to Collective Goods Provider" (PDF). U.S.-China Economic and Security Review Commission. p. 8. Retrieved 14 January 2016.
Sources
- Weller, J. Marvin. Caravan Across China: An American Geologist Explores the Northwest 1937–1938. (1984). March Hare Publishing, San Francisco. ISBN 0-918295-00-9.