The impact of the
petroleum industry
The petroleum industry, also known as the oil industry or the oil patch, includes the global processes of exploration, extraction, refining, transportation (often by oil tankers and pipelines), and marketing of petroleum products. The large ...
has been increasing globally as China ranks seventh for
oil production
Petroleum is a fossil fuel that can be drawn from beneath the earth's surface. Reservoirs of petroleum was formed through the mixture of plants, algae, and sediments in shallow seas under high pressure. Petroleum is mostly recovered from oil dri ...
and second in
crude oil consumption in the world.
China imported a record 6.7m barrels a day (b/d) of oil in 2015 and was forecast "to overtake the U.S. as the world’s biggest crude importer in 2016"
[Gale number:8972]
History
Early history
Before the development of the industry, Chinese oil production was measured in quarts and output used solely as a lubricant. The first well, developed under the most primitive of conditions and with relatively untrained personnel, began to produce over twenty barrels of oil a day.
In time, with equipment brought in from Szechuan and elsewhere and the development of several distillation plants, nine more wells were drilled in the immediate area of
Yumen wells which then had a capacity of about 1,000 barrels of oil and 10,000 gallons of gasoline a day, except in winter when cold weather caused the oil to congeal. This was the first major oil field in China.
Ensuring adequate energy supply to sustain economic growth has been a core concern of the Chinese government since 1949.
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".
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.
The most important is the
Daqing oil field in
Heilongjiang
Heilongjiang () formerly romanized as Heilungkiang, is a province in northeast China. The standard one-character abbreviation for the province is (). It was formerly romanized as "Heilungkiang". It is the northernmost and easternmost province ...
that has been the backbone of Chinese oil production for many decades.
Export era
In 1973, as production increased,
China began exporting
crude oil to
Japan, and began offshore exploration. Exports increased to 20 million tons in 1985, before internal consumption began increasing faster than production. By 1993, internal demand for
oil
An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturated ...
exceeded domestic production, and China became a net oil importer.
Import dependence
Although China is still a major crude oil producer, it became an oil importer in the 1990s. China became dependent on imported oil for the first time in its history in 1993 due to demand rising faster than domestic production.
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.
By 2008, much of
China's oil imports derived largely from
Southeast Asia
Southeast Asia, also spelled South East Asia and South-East Asia, and also known as Southeastern Asia, South-eastern Asia or SEA, is the geographical south-eastern region of Asia, consisting of the regions that are situated south of mainlan ...
, 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.
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
China Petroleum & Chemical Corporation (中国石油化工股份有限公司) or Sinopec (), is a Chinese oil and gas enterprise based in Beijing. It is listed in Hong Kong and also trades in Shanghai.
Sinopec Limited's parent, Sinopec ...
.
Province started producing in 1960, and by 1963 was producing nearly 2.3 million tons of oil. Production from
Daqing declined, but in 1965,
oil fields in Shengli,
Shandong, Dagang, and
Tianjin
Tianjin (; ; Mandarin: ), alternately romanized as Tientsin (), is a municipality and a coastal metropolis in Northern China on the shore of the Bohai Sea. It is one of the nine national central cities in Mainland China, with a total popu ...
yielded enough oil to nearly eliminate the need of importing
crude oil. In 2002, annual crude petroleum production was 1,298,000,000 barrels, and annual crude petroleum consumption was 1,670,000,000 barrels.
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
South China Sea
The South China Sea is a marginal sea of the Western Pacific Ocean. It is bounded in the north by the shores of South China (hence the name), in the west by the Indochinese Peninsula, in the east by the islands of Taiwan and northwestern Phi ...
, the Liuhua 11-1 field – located 210 km southeast of
Hong Kong
Hong Kong ( (US) or (UK); , ), officially the Hong Kong Special Administrative Region of the People's Republic of China (abbr. Hong Kong SAR or HKSAR), is a city and special administrative region of China on the eastern Pearl River Delta i ...
in the
Pearl River Mouth Basin offshore south China, was discovered by
Amoco
Amoco () is a brand of filling station, fuel stations operating in the United States, and owned by BP since 1998. The Amoco Corporation was an American chemical and petroleum, oil company, founded by Standard Oil Company in 1889 around a oil re ...
(now
BP) in January 1987 in
typhoon alley.
Water depth, the presence of
heavy oil and a "very strong bottom-water drive" were among the technical challenges that had to be resolved before the oil could be extracted.
Amoco
Amoco () is a brand of filling station, fuel stations operating in the United States, and owned by BP since 1998. The Amoco Corporation was an American chemical and petroleum, oil company, founded by Standard Oil Company in 1889 around a oil re ...
and Nanhai East engineering teams experimented with offshore drilling techniques, floating production, storage and off-loading system (
FPSO
A floating production storage and offloading (FPSO) unit is a floating vessel used by the offshore oil and gas industry for the production and processing of hydrocarbons, and for the storage of oil. An FPSO vessel is designed to receive h ...
) that would have drilling and production support.
By 2008, the FPSO had equipment capable of handling 65,000 bbl of oil and 300,000 bbl of total fluids per day and it would be loaded and shipped by shuttle tankers.
In 2010, oil blocks in
Wushi oil field (off
Zhanjiang
Zhanjiang (), historically spelled Tsamkong, is a prefecture-level city at the southwestern end of Guangdong province, People's Republic of China, facing Haikou city to the south.
As of the 2020 census, its population was 6,981,236 (6,994,832 ...
, near
Hainan
Hainan (, ; ) is the smallest and southernmost province of the People's Republic of China (PRC), consisting of various islands in the South China Sea. , the largest and most populous island in China,The island of Taiwan, which is slightly l ...
) began to be auctioned to foreign companies, with CNOOC having the option to increase its stake to 51% whenever required.
China's $1 billion oil drilling rig, the ''
Haiyang Shiyou 981'' – owned and operated by the
China National Offshore Oil Corporation – in the
South China Sea
The South China Sea is a marginal sea of the Western Pacific Ocean. It is bounded in the north by the shores of South China (hence the name), in the west by the Indochinese Peninsula, in the east by the islands of Taiwan and northwestern Phi ...
, ''
Ocean Oil 981'' – began its first drilling operations in 2012.
It led to
protests
A protest (also called a demonstration, remonstration or remonstrance) is a public expression of objection, disapproval or dissent towards an idea or action, typically a political one.
Protests can be thought of as acts of coopera ...
and hence had to be shifted back.
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.
China National Offshore Oil Corp,
China National Petroleum Corp, and
Sinopec
China Petroleum & Chemical Corporation (中国石油化工股份有限公司) or Sinopec (), is a Chinese oil and gas enterprise based in Beijing. It is listed in Hong Kong and also trades in Shanghai.
Sinopec Limited's parent, Sinopec ...
have largely invested in exploration and development in countries that had oil fields but do not have funds or technology to develop them. In 2004 CNOOC signed a deal to extract a million barrels of oil a day in
Indonesia
Indonesia, officially the Republic of Indonesia, is a country in Southeast Asia and Oceania between the Indian and Pacific oceans. It consists of over 17,000 islands, including Sumatra, Java, Sulawesi, and parts of Borneo and New Guine ...
as well as other projects with Australia.
In addition, an oil reserve that would theoretically fill with 30 days worth of oil has begun construction in
China. However, their oil policy on the world oil market was not completely clear as to how they would deal with the situation as a whole.
The Chinese government is taking diplomatic action to improve their relationship with
ASEAN
ASEAN ( , ), officially the Association of Southeast Asian Nations, is a political and economic union of 10 member states in Southeast Asia, which promotes intergovernmental cooperation and facilitates economic, political, security, militar ...
states. According to a 2008 report, the Chinese government had to take extra strides to secure good relationships with its neighbors.
Malaysia
Malaysia ( ; ) is a country in Southeast Asia. The federation, federal constitutional monarchy consists of States and federal territories of Malaysia, thirteen states and three federal territories, separated by the South China Sea into two r ...
is a neighbor state that was often seen as in contention with
China because of political differences. Yet, the relationship with
Malaysia
Malaysia ( ; ) is a country in Southeast Asia. The federation, federal constitutional monarchy consists of States and federal territories of Malaysia, thirteen states and three federal territories, separated by the South China Sea into two r ...
was symbiotic because of their large supply of
oil
An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturated ...
and their need for security assurances from
China. In 2008
Malaysia
Malaysia ( ; ) is a country in Southeast Asia. The federation, federal constitutional monarchy consists of States and federal territories of Malaysia, thirteen states and three federal territories, separated by the South China Sea into two r ...
was the number one producer of
petroleum
Petroleum, also known as crude oil, or simply oil, is a naturally occurring yellowish-black liquid mixture of mainly hydrocarbons, and is found in geological formations. The name ''petroleum'' covers both naturally occurring unprocessed crud ...
in the
South China Sea
The South China Sea is a marginal sea of the Western Pacific Ocean. It is bounded in the north by the shores of South China (hence the name), in the west by the Indochinese Peninsula, in the east by the islands of Taiwan and northwestern Phi ...
, and they account for over one half of the production in the region.
Foreign acquisitions
By 2008, China owned less than 1 percent of the oil company
BP, worth about $1.97 billion.
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
An energy crisis or energy shortage is any significant bottleneck in the supply of energy resources to an economy. In literature, it often refers to one of the energy sources used at a certain time and place, in particular, those that supply n ...
.
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
Zhejiang ( or , ; , Chinese postal romanization, also romanized as Chekiang) is an East China, eastern, coastal Provinces of China, province of the People's Republic of China. Its capital and largest city is Hangzhou, and other notable citie ...
Province, was built by
Sinopec
China Petroleum & Chemical Corporation (中国石油化工股份有限公司) or Sinopec (), is a Chinese oil and gas enterprise based in Beijing. It is listed in Hong Kong and also trades in Shanghai.
Sinopec Limited's parent, Sinopec ...
,
China's largest oil refining company. The storage space is 5.2 million cubic meters says the
National Development and Reform Commission
The National Development and Reform Commission of the People's Republic of China (NDRC), formerly State Planning Commission and State Development Planning Commission, is a macroeconomic management agency under the State Council, which has b ...
.
Zhejiang
Zhejiang ( or , ; , Chinese postal romanization, also romanized as Chekiang) is an East China, eastern, coastal Provinces of China, province of the People's Republic of China. Its capital and largest city is Hangzhou, and other notable citie ...
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
Energy security is the association between national security and the availability of natural resources for energy consumption. Access to (relatively) cheap energy has become essential to the functioning of modern economies. However, the uneven d ...
, as all three of the stock oil bases were within range of
Taiwan
Taiwan, officially the Republic of China (ROC), is a country in East Asia, at the junction of the East and South China Seas in the northwestern Pacific Ocean, with the People's Republic of China (PRC) to the northwest, Japan to the nort ...
ese cruise missile attacks.
These stockpiling strategies, as well as the international acquisition companies, are state-run initiatives to combat supply disruption.
According to a 2007 article in ''
China News'', at that time China's expanded reserve would include both mandated commercial reserves and a state-controlled reserves and would be implemented in three stages to be completed by 2011.
The state-controlled reserves phase one consisted of a reserve to be completed by the end of 2008. The second phase of the government-controlled reserves with an additional was to be completed by 2011. In 2009
Zhang Guobao, head of the
National Energy Administration
The National Development and Reform Commission of the People's Republic of China (NDRC), formerly State Planning Commission and State Development Planning Commission, is a macroeconomic management agency under the State Council, which has br ...
, announced the third phase that would expand reserves by with the goal of increasing China's SPR to 90 days of supply by 2020.
The planned state reserves of together with the planned enterprise reserves of will provide around 90 days of consumption or a total of .
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
An oil is any nonpolar chemical substance that is composed primarily of hydrocarbons and is hydrophobic (does not mix with water) & lipophilic (mixes with other oils). Oils are usually flammable and surface active. Most oils are unsaturated ...
benchmark
Benchmark may refer to:
Business and economics
* Benchmarking, evaluating performance within organizations
* Benchmark price
* Benchmark (crude oil), oil-specific practices
Science and technology
* Benchmark (surveying), a point of known elevati ...
.
Transportation
In 2004,
China had to import 100 million tons of
crude oil to supply its energy demand, more than half of which came from the
Middle East
The Middle East ( ar, الشرق الأوسط, ISO 233: ) is a geopolitical region commonly encompassing Arabia (including the Arabian Peninsula and Bahrain), Asia Minor (Asian part of Turkey except Hatay Province), East Thrace (Europ ...
.
China is attempting to secure its future oil share and establish deals with other countries.
Communist Party general secretary Hu Jintao has proposed to build a pipeline from
Russia
Russia (, , ), or the Russian Federation, is a transcontinental country spanning Eastern Europe and Northern Asia. It is the largest country in the world, with its internationally recognised territory covering , and encompassing one-eig ...
n oil fields to support
China's markets as well as other billion-dollar arrangements with
Russia
Russia (, , ), or the Russian Federation, is a transcontinental country spanning Eastern Europe and Northern Asia. It is the largest country in the world, with its internationally recognised territory covering , and encompassing one-eig ...
, Central Asia, and
Burma
Myanmar, ; UK pronunciations: US pronunciations incl. . Note: Wikipedia's IPA conventions require indicating /r/ even in British English although only some British English speakers pronounce r at the end of syllables. As John Wells explai ...
, and diversify its energy sector by seeking imports from other regions of the world and by starting alternative energy programs such as
nuclear
Nuclear may refer to:
Physics
Relating to the nucleus of the atom:
* Nuclear engineering
*Nuclear physics
*Nuclear power
*Nuclear reactor
*Nuclear weapon
*Nuclear medicine
*Radiation therapy
*Nuclear warfare
Mathematics
*Nuclear space
*Nuclear ...
.
In 2009 China completed its first critical oil pipeline, the
Atyrau-Alashankou oil pipeline (Kazakhstan–China oil pipeline) in Central Asia,
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.
See also
*
Climate change in China
Climate change is having major effects on the Chinese economy, society and the environment. China is the largest emitter of carbon dioxide, through an energy infrastructure heavily focused on coal. Other industries, such as a burgeoning constr ...
*
Natural gas in China
Between 2009 and 2014, gas consumption, production, and imports in China have grown dramatically, with two-digit growth. According to China National Petroleum Corporation, CNPC, the installed capacity of gas-fired power plants in the country is ...
References
Sources
* Weller, J. Marvin. ''Caravan Across China: An American Geologist Explores the Northwest 1937–1938''. (1984). March Hare Publishing, San Francisco. .
External links
China Petroleum and Chemical Industry Association (CPCIA)
{{Asia topic, Petroleum industry in
Petroleum in China
China