While China is increasingly dependent on energy imports – particularly gas – owing to rapid growth in energy demand, there is considerable upside potential from its unconventional gas resources. A more open environment to foreign investment is needed in order to meet the ambitious production targets set by the state, especially if its vast unconventional gas resources are to be maximised. In the meantime, oil and gas demand could surprise to the downside if economic expansion comes under
pressure.
The main trends and developments we highlight for China’s oil and gas sector are:
Much of the country’s upside production potential will come from increased production from fields yet to reach its peak capacity such as Tarim. Enhanced oil recovery (EOR) measures will also help to maintain production levels at older fields such as PetroChina”s Daqing and Sinopec”s Shengli. We expect Chinese production to rise over the next few years, peaking at 4.48mn b/d in 2016 before
declining to 4.36mn b/d in 2021.
A slowdown in economic growth makes it unlikely for a reform in China”s fuel price mechanism in the short-term, as it could bring up domestic fuel prices and run counter to the government”s aim to stimulate economic growth. This could decrease refiners” willingness to expand China”s refining capacity, given the loss they are incurring from their downstream operations – a result of buying
crude feedstock at high international prices and selling refined products at low state-mandated rates.
Hence, we forecast a slow rise in China’s refining capacity, from 10.4mn b/d in 2012 to 11.5mn b/d by 2016. As a weak global economy and troubles in its export markets contribute to slower economic growth in China, the rate of oil consumption growth is likely to decelerate as well. BMI forecasts that Chinese oil demand should reach 11.5mn b/d by 2016, a lower estimate than the 12.5mn b/d we had initially expected. Consumption should grow to 13.3mn b/d by 2021.
A report by China”s Ministry of Land and Resources has estimated China”s technically recoverable shale reserves at 25.1trn cubic metres (tcm). This is significantly lower than the 36.1tcm estimate made by the US Energy Information Administration (EIA) in April 2011. The discrepancy reflects the limitations of resource estimations at such an early stage of appraisal. Further changes in reserves
estimates are therefore likely as operators” understanding of China”s various shale basins improves.
The ministry”s report considered a number of barriers to realising this vast shale gas potential. In particular, it highlighted China”s complicated geology and lack of domestic technological expertise. In view of these challenges, we expect shale gas production to only slowly make its impact felt by 2018. Gas production will continue to grow, based on conventional and deepwater production, from an
estimate of 110.8bn cubic metres (bcm) in 2012 to 133.40bcm in 2016.
China Oil & Gas Report Q4 2012 © Business Monitor International Ltd Page 8 Gas consumption is set to grow by the combination of economic growth, increasing use of gas as cleaner energy alternative and government policies tailored to encourage gas usage in industry and households. It could grow from an estimate of 145.9bcm in 2012 to 227.5bcm in 2016, rising further
still to 346.8bcm as cheap prices accelerate the use of domestic gas in households and industry. Oil imports are expected to cost China some US$228.80bn in 2012, which could climb to US$237.45bn in 2016. Net gas imports are expected to rise to 94.1bcm in 2016, costing some US$43.7bn, using BMI base case assumptions. This suggests a total oil and gas import bill of US$281.10bn by 2016. At the time of writing we assume an OPEC basket oil price for 2012 of US$107.05/bbl, falling to US$99.10/bbl in 2013.
Published: October 2012 No. of Pages: 135 Price: US $ 1175
Table of Contents
Executive Summary 7
SWOT Analysis … 9
China Oil and Gas SWOT 9
Global Energy Market Outlook . 10
Oil: Getting Closer To Emerging Markets Inflection Point 10
Table: Oil Consumption Forecasts, 2010-2016 (’000b/d)… 12
Table: Oil Production Forecasts, 2010-2016 (’000b/d).. 14
Regional Energy Market Outlook. 18
Frontier Plays & Brownfields Bolster Asia”s Upstream Outlook . 18
Table: Number Of Rigs in Operation In Asia, 2002-2012… 19
China Energy Market Overview 24
Table: Upstream Projects Database … 25
Industry Forecast Scenario .. 26
Table: China Oil & Gas – Historical Data And Forecasts, 2009-2016 … 26
Table: China Oil & Gas – Long-Term Forecasts, 2014-2021. 27
Oil And Gas Reserves .. 29
Offshore China 29
Estimates For Resources In East China And South China Sea 30
Coal-Bed Methane .. 30
Shale Gas 31
Oil Supply And Demand… 32
Gas Supply And Demand . 35
Tight Gas 36
Coal-Bed Methane .. 37
Shale Gas Production . 39
LNG 44
Refining And Oil Products Trade 45
Revenues/Import Costs 46
Key Risks To BMI’s Forecast Scenario… 47
Oil And Gas Infrastructure… 48
Oil Refineries … 48
Table: Refineries In China Of Over 200,000b/d Capacity .. 48
Oil Storage Facilities… 53
Table: China’s Strategic Petroleum Reserve .. 53
Table: China’s Commercial Oil* Storage Capacity 54
Oil Pipelines 55
Coal-To-Liquids (CTL) Plants . 57
LNG Terminals 58
Table: LNG Terminals In China . 58
Gas Storage Facilities.. 64
Gas Pipelines … 64
China Oil & Gas Report Q4 2012
© Business Monitor International Ltd Page 4
Regional And Country Risk/Reward Ratings.. 68
Table: Asia Downstream Risk/Reward Ratings… 71
Table: Asia Upstream Risk/Reward Ratings … 72
China Upstream Rating – Overview … 72
China Upstream Rating – Rewards. 72
China Upstream Rating – Risks .. 73
China Downstream Rating – Overview… 73
Competitive Landscape … 74
Table: Key Players – Chinese Oil And Gas Sector . 75
Overview/State Role. 77
Licensing And Regulation … 77
Government Policy . 77
Licensing Rounds 79
International Energy Relations … 81
Table: Key Upstream Players . 86
Table: Key Downstream Players. 87
Company Monitor . 88
China National Petroleum Corporation (CNPC). 88
PetroChina… 92
China Petroleum & Chemical Corporation (Sinopec) . 95
China National Offshore Oil Corporation (CNOOC) .. 98
Shell (China) Ltd 102
BP China 104
ExxonMobil China . 106
Husky Energy. 108
Chevron . 110
Total… 112
ConocoPhillips – Summary… 114
Eni – Summary.. 114
BG Group – Summary… 115
Others – Summary 115
Asia – Regional Appendix.. 117
Table: Oil Consumption – Historical Data & Forecasts, 2009-2016 (’000b/d). 117
Table: Oil Consumption – Long-Term Forecasts, 2014-2021 (’000b/d) 117
Table: Oil Production – Historical Data & Forecasts, 2009-2016 (’000b/d) 118
Table: Oil Production – Long-Term Forecasts, 2014-2021 (’000b/d) … 119
Table: Refining Capacity – Historical Data & Forecasts, 2009-2016 (’000b/d) … 119
Table: Refining Capacity – Long-Term Forecasts, 2014-2021 (’000b/d) .. 120
Table: Gas Production – Historical Data & Forecasts, 2009-2016 (bcm) 121
Table: Gas Production – Long-Term Forecasts, 2014-2021 (bcm) 121
Table: Gas Consumption – Historical Data & Forecasts, 2009-2016 (bcm) . 122
Table: Gas Consumption – Long-Term Forecasts, 2014-2021 (bcm) 122
Table: LNG Exports – Historical Data & Forecasts, 2009-2016 (bcm). 123
Table: Net LNG Exports – Long-Term Forecasts, 2014-2021 (bcm) . 123
Methodology And Risks To Forecasts .. 125
China Oil & Gas Report Q4 2012
© Business Monitor International Ltd Page 5
Glossary Of Terms.. 126
Table: Glossary of Terms.. 126
Oil And Gas Risk/Reward Ratings Methodology.. 128
Ratings Overview… 128
Table: BMI’s Oil & Gas Business Environment Ratings – Structure . 129
Indicators… 129
Table: BMI’s Oil & Gas Upstream Ratings – Methodology.. 129
Table: BMI’s Oil & Gas Business Environment Downstream Ratings – Methodology.. 131
BMI Methodology 133
How We Generate Our Industry Forecasts 133
Energy Industry.. 133
Cross checks .. 134
Sources… 134Table: Oil Consumption Forecasts, – (’b/d)
Table: Oil Production Forecasts, – (’b/d)
Table: Number Of Rigs in Operation In Asia, –
Table: Upstream Projects Database
Table: China Oil & Gas – Historical Data And Forecasts, –
Table: China Oil & Gas – Long-Term Forecasts, –
Table: Refineries In China Of Over ,b/d Capacity
Table: China’s Strategic Petroleum Reserve
Table: China’s Commercial Oil* Storage Capacity
Table: LNG Terminals In China
Table: Asia Downstream Risk/Reward Ratings
Table: Asia Upstream Risk/Reward Ratings
Table: Key Players – Chinese Oil And Gas Sector
Table: Key Upstream Players
Table: Key Downstream Players
Table: Oil Consumption – Historical Data & Forecasts, – (’b/d)
Table: Oil Consumption – Long-Term Forecasts, – (’b/d)
Table: Oil Production – Historical Data & Forecasts, – (’b/d)
Table: Oil Production – Long-Term Forecasts, – (’b/d)
Table: Refining Capacity – Historical Data & Forecasts, – (’b/d)
Table: Refining Capacity – Long-Term Forecasts, – (’b/d)
Table: Gas Production – Historical Data & Forecasts, – (bcm)
Table: Gas Production – Long-Term Forecasts, – (bcm)
Table: Gas Consumption – Historical Data & Forecasts, – (bcm)
Table: Gas Consumption – Long-Term Forecasts, – (bcm)
Table: LNG Exports – Historical Data & Forecasts, – (bcm)
Table: Net LNG Exports – Long-Term Forecasts, – (bcm)
Table: Glossary of Terms
Table: BMI’s Oil & Gas Business Environment Ratings – Structure
Table: BMI’s Oil & Gas Upstream Ratings – Methodology
Table: BMI’s Oil & Gas Business Environment Downstream Ratings – Methodology
