Why China Must Develop its Huge Oil and Gas Reserves

China is the world's second largest oil importer and will soon become the largest, yet it has petroleum resources that match the US, meaning there is no reason why it needs to become increasingly reliant on imported crude oil and natural gas.

In 2011 China produced 4.3 million barrels of oil a day, making it the fourth largest oil producer in the world, yet whilst in 1993 it was a net oil exporter, in the last decade its consumption has exploded to more than nine million barrels a day.

As it stands China will face a growing dependence on expensive imports from the Middle East and Africa, supplies that are unstable and rely on travelling long distances through vulnerable sea lanes and some of the world's most hazardous choke points.

Increasing domestic production of oil and gas would enable China to reduce its economic and military vulnerability. With this in mind the Chinese government has set in place schemes to improve energy efficiency and develop its strategic petroleum reserves; it has also commissioned the construction of a new fleet of naval vessels which will be used to protect its supply lines.

Relevant Article: Tapping into Pakistan's Massive Oil and Gas Reserves

China's vast land mass and surrounding seas contain many large sedimentary basins that are likely to contain huge volumes of oil and gas. On the mainland there are six giant basins which are estimated to contain huge shale gas deposits, as well as many undiscovered conventional oil wells, similar basins also exist just off the southern and eastern coasts.

The US Geological Survey (USGS) believes that the six onshore basins contain around 15 billion barrels of recoverable oil, 88 trillion cubic feet of conventional gas, 1.4 billion barrels of natural gas liquids, and around 1,275 trillion cubic feet of unconventional shale gas.

Aware of the vast potential that its domestic oil and gas production industry has, China, in its latest five year plan, has committed to "strengthen the exploration and development of petroleum and natural gas resources, stabilise domestic petroleum output, and the development and utilisation of unconventional oil and gas resources, such as coal-bed gas and shale gas."

By. Joao Peixe of Oilprice.com