China’s Oil Production Inches Higher In H1

China produced 95.35 million tons (699.2 million barrels) of crude oil during the first half of the year, Xinhua reports, citing a government official. This represented a modest 0.8-percent annual increase.

Natural gas production, however, rose by more than 10 percent in the period, to 86.41 billion cubic meters, the official from the National Energy Administration told Chinese media.  This highlights the country’s continued strong focus on natural gas as it moves away from coal to less emission-intensive fossil fuels.

The increase in crude oil production, however small, was worth noting. China has been struggling with a decline in domestic oil production caused by a combination of natural depletion and geological challenges that make new production in many cases prohibitively expensive.

China’s failed shale revolution is a case in point. According to EIA estimates, China ranks third in the world in terms of technically recoverable shale oil resources, behind Russia and the United States. The country also has recoverable shale gas reserves of 1,115 trillion cu ft, the latest estimate of the Energy Information Administration from 2015 shows.

This makes China the biggest reservoir of shale gas, with Argentina a distant second with a little over 800 trillion cu ft. Yet, it is unlikely that China will be able to duplicate the success of the U.S. shale gas boom because most of these reserves are in geologically difficult areas.

Despite these challenges, a discovery announced early this year brought back hopes that China could commercialize its vast shale oil reserves. In March, Xinhua reported that CNPC had struck substantial oil reserves in the northern province of Tianjin. Earlier, the state-owned company had announced another discovery, in western China, that as of March was producing some 733 bpd of crude.

While that’s nowhere near the over 8 million bpd that the U.S. shale patch yields to date, according to Morgan Stanley, China is on its way to experience its own shale boom, with production rising by 100,000-200,000 bpd by 2025.

By Irina Slav for Oilprice.com

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