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Charles Kennedy

Charles Kennedy

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Chinese Oil Major Sinopec Announces Oil, Gas Discovery

China’s state-owned oil and gas major Sinopec has struck oil and gas at a field in the northwestern province of Xinjiang, Reuters reports, adding that the reserves at the field are estimated at some 100 million tons.

This would be equal to about 733 million barrels based on a 7.33 barrels-to-the-ton conversion ratio.

The state company said on Chinese social media that it had achieved daily output of more than 6,000 barrels of crude and close to 600,000 cubic meters of natural gas.

The newly discovered field is in a legacy-producing region in the Tarim Basin. It is also the location of the Shunbei field, which produced about 1 million tons of crude oil last year, up by 30 percent from the previous year, and 50 million cubic meters of gas, up 32 percent on the year.

Local production of oil and gas is being prioritized by the Chinese authorities because of the country’s currently overwhelming dependence on imported fossil fuels. Last year, Chinese oil and gas importers had a field day with record-low prices but the rout could not continue forever and domestic production growth is once again high on the priority list. And state majors are delivering.

Earlier this week, another Chinese energy giant, CNPC, announced a new discovery at the Daqing field cluster, which is one of the biggest oil production centers in China. The new reservoir is in a shale formation and contains an estimated 1.27 billion tons of oil.

China has significant oil resource, especially in shale formations. However, their geology is challenging, making the extraction of these resources a lot costlier than in other places such as the U.S. shale patch.

This in turn discourages exploration and production companies from investing in new production because of the lower margins and uncertain results from exploratory work.

By Charles Kennedy for Oilprice.com

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  • Mamdouh Salameh on August 26 2021 said:
    For a country which imported on average 11.67 million barrels a day (mbd) in 2020 amounting to 75% of its crude oil needs, any oil discoveries whether small or medium increase its production, offset depletion and add to its proven reserves.

    Today it was reported that China’s state-owned oil and gas major Sinopec has struck oil and gas at a field in the north-western province of Xinjiang with reserves estimated at some 100 million tons (733 million barrels).

    This discovery and CNBC’s announcement yesterday of a new discovery of shale oil reserves estimated at 1.27 billion tons (12.461 billion barrels) at the Daqing oilfield in the north east of the country will raise China’s oil reserves from 25.9 bb currently to 39.09 bb once the new discoveries have been proven.

    At present, almost three quarters of China’s crude oil production of 3.84 mbd comes from just three ageing oilfields in the north-east: Daqing, Shengli in the Yellow River estuary and Liaohe.

    China needs every single drop of oil it can get its hands on as its dependence on imported oil is projected to rise from 75% in 2020 to 82% by 2025 and 87% by 2030.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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