In news certain to delight the government, Sinopec announced the discovery of a massive natural gas deposit in the country’s Sichuan Basin.
According to Sinopec, the Sichuan Basin’s Anyue field in the Moxi bloc holds 440.4 billion cubic meters of proven geological reserves, of which 308.2 billion cubic meters are “technically recoverable,” equivalent to two years of national consumption.
Sinopec is building a facility capable of pumping 4 billion cubic meters of gas annually in the discovery bloc, with a second phase online to produce an additional 6 billion cubic meters per year under a proposed second phase of expansion at the field, which up to now has already produced 600 million cubic meters of natural gas. Test production resulted in average daily production of 1.1 million cubic meters per well, and the producing wells have an average daily output of 600,000 cubic meters.
Related Article: A Quick Trading Opportunity for 2014
This can only produce satisfaction in Beijing, as China is the world's second-largest consumer of oil and projected to move from second-largest net importer of oil to the largest in 2014.
China’s natural gas consumption has been rising rapidly as it turns to the cleaner-burning fuel to cut pollution. Its gas consumption in 2013 rose 13.9 percent from a year earlier to 167.6 billion cubic meters, making China the world’s third-largest gas consumer, according to a PetroChina Co. report, of which over 30 percent of the country’s natural gas was imported.
As of January 2014, estimates place China as having 155 trillion cubic feet (tcf) of proven natural gas reserves, 14 tcf higher than reserves estimated in 2013 and the largest in the Asia-Pacific region. China's natural gas production and demand have risen substantially in the past decade. In the decade 2002-2012, China more than tripled natural gas production to 3.8 tcf. The Chinese government intends to produce about 5.5 tcf of natural gas by the end of next year as part of its policy to utilize more natural gas to phase out other hydrocarbons in the country's energy portfolio.
The U.S. government’s Energy Information Administration projects that China’s long-term natural gas production will rise to 4.2 tcf by 2020 and more than double from current levels to reach 10.1 tcf by 2040.
Related Article: A Sichuan Knife Fight
China was traditionally a net natural gas exporter until 2007, when it became a net natural gas importer for the first time. In the past seven years, Chinese natural gas imports have increased dramatically along with a rapidly developing pipeline network providing natural gas imports from former Soviet republics Kazakhstan, Turkmenistan and Uzbekistan, along with the country developing a natural gas processing infrastructure.
Nor is this likely to be all. The EIA notes, “The Sichuan Basin is China's key natural gas-producing area in the southwestern region. The largest recent discoveries in the southwestern region are Sinopec's finds at the Yuanba and Puguang fields in Sichuan Province. Sinopec started commercial production at Puguang in 2010 and ramped up to its peak capacity of 350 billion cubic feet (bcf) in 2012. Sinopec anticipates the field will produce at this level for about two decades. China's national oil companies anticipate that Yuanba will produce 120 bcf annually by 2016. Sichuan Province also holds five high-sulfur content (sour) gas fields in the Chuandongbei basin. In 2007, CNPC awarded a 30-year production-sharing contract (PSC) to Chevron to bring the technically challenging fields online. Field development has encountered several delays, and initial production has been pushed back to the second half of 2014. Chevron is building two sour natural gas processing plants with a combined production capacity of 270 bcf annually.”
Between imports and indigenous production, China seems to be moving steadily towards downsizing its natgas imports, which will have LNG producers everywhere from Qatar to Australia increasingly edgy.
By John Daly from Oilprice.com