• 3 minutes China has *Already* Lost the Trade War. Meantime, the U.S. Might Sanction China’s Largest Oil Company
  • 7 minutes Saudi and UAE pressure to get US support for Oil quotas is reportedly on..
  • 11 minutes China devalues currency to lower prices to address new tariffs. But doesn't help. Here is why. . . .
  • 15 minutes What is your current outlook as a day trader for WTI
  • 4 hours Will Uncle Sam Step Up and Cut Production
  • 51 mins In The Bright Of New Administration Rules: Immigrants as Economic Contributors
  • 2 mins Long Range Attack On Saudi Oil Field Ends War On Yemen
  • 10 hours Domino Effect: Rashida Tlaib Rejects Israel's Offer For 'Humanitarian' Visit To West Bank
  • 10 hours Gretta Thunbergs zero carbon voyage carbon foot print of carbon fibre manufacture
  • 1 hour * 8 to 10 "good" years left in oil industry * UAE model for Economic Deversification * Others spent oil billions on terrorism, wars, lopping off heads * Too late now
  • 4 hours CLIMATE PANIC! ELEVENTY!!! "250,000 people die a year due to the climate crisis"
  • 15 hours NATGAS, LNG, Technology, benefits etc , cleaner global energy fuel
  • 10 hours Continental Resource's Hamm wants shale to cut production. . . He can't compete with peers.
  • 23 hours Why Oil is Falling (including conspiracy theories and other fun stuff)
  • 23 hours Significant: Boeing Delays Delivery Of Ultra-Long-Range Version Of 777X
  • 13 hours Trump vs. Xi Trade Battle, Running Commentary from Conservative Tree House
  • 5 hours US Petroleum Demand Strongest Since 2007
Alt Text

Trump Freezes All Caracas Assets In Surprise Move

President Donald Trump signed an…

Alt Text

Oil Erases Gains On Crude Inventory Build

Crude oil prices fell further…

Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

More Info

Premium Content

China’s Oil Majors See Production In Biggest Fields Shrink

One of the biggest oilfields in China, Daqing, has slipped into a loss of around $700 million over the first two months of this year, according to the energy behemoth that operates the field.

This level of loss is substantial even for a company as large as CNPC, and it’s a clear indicator that the world’s second-largest oil consumer has not been spared the fallout from the international price slump.

China holds proved oil reserves of 24.6 billion barrels, according to EIA data, which makes it the most oil-rich country in the Asia-Pacific, after Russia. It has been actively developing these reserves, and although it’s nowhere near becoming self-sufficient, it has been producing over four million barrels daily over the last 12 months. Related: Horizontal Land Rig Count Summary 18th March 2016

The government has been protecting the local oil companies by installing a price floor, but it seems this floor has not helped much. It may even have had an adverse effect, as unlike consumers elsewhere, Chinese consumers have been unable to take advantage of lower fuel prices, with demand remaining depressed, hurting oil companies’ profits.

The local majors are clearly struggling. CNPC has already reduced daily production at Daqing and now plans to cut it further. Overall production will also be cut, although not drastically, along with capital expenditure. Related: What Happens When Oil Hits $50?

One of China’s other state-owned oil companies, Sinopec, is in a similar position. Earlier this year, Chinese media reported the company was preparing to close four oilfields in the eastern China Shengli deposit to survive the downturn. Shengli generated losses of some $1.4 billion over 2015. When this is compared with the $770 million in losses from Daqing, incurred in just two months, the scale of the problem Chinese oil companies face becomes very clear.

CNOOC is also cutting production: This year, the offshore-focused firm is planning to pump between 2 percent and 5 percent less crude than in 2015. Related: Oil Markets Increasingly Bullish As Long Positions Surge

All in all, the Chinese E&P industry is undergoing a process similar to what happened in steelmaking. Production costs per barrel of oil in China are around $40. Abroad, these are lower and even where they are not, exporters such as Russia and Saudi Arabia are ready and willing to lose money for a while in order to maintain their market share. Chinese companies cannot afford that, just like most local miners are incapable of competing with cheap iron ore from Vale, Rio Tinto and BHP Billiton.

To top it all, the three giants have been the target of an anticorruption probe and are now facing a major overhaul that is aimed at breaking up their dominance. It will be some time before CNPC, Sinopec, and CNOOC catch a break, which will only come with higher oil prices.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Download The Free Oilprice App Today

Back to homepage


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News
Download on the App Store Get it on Google Play