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China ENERGY
Oil and Natural Gas
Before 1949 China imported most of its oil. During the First
Five-Year Plan it invested heavily in exploration and welldevelopment . In 1959 vast reserves were discovered in Songhua
Jiang-Liao He basin in northeast China. The Daqing oil field in
Heilongjiang Province became operational in 1960. Daqing was
producing about 2.3 million tons of oil by 1963, and it continued
to lead the industry through the 1970s. Further important
discoveries, including the major oil fields of Shengli, in
Shandong, and Dagang, in Tianjin, enabled China to meet domestic
needs and eliminate nearly all imports by the mid-1960s. In 1973,
despite a steadily growing internal demand for petroleum products,
output was large enough to export 1 million tons of crude oil to
Japan. Exports increased to 6.6 million tons in 1974 and reached
13.5 millions tons in 1978. In 1985 exports of crude oil amounted
to approximately twenty million tons, roughly 16 percent of total
production. The majority of 1985 exports were to Japan, but the
government also had released increasing quantities on the spot
market and sent some to Singapore for refining. Although the
government temporarily abandoned its drive to broaden its oil
export base in 1986, 131 million tons of crude oil still were
produced, an increase of 5.8 million tons over 1985.
Oil reserves are large and widely dispersed. In general,
development is concentrated on deposits readily accessible from
major industrial and population centers
(see fig. __, Fuels, Power,
Minerals, and Metals, 1983). Deposits in remote areas such as the
Tarim, Junggar, and Qaidam basins, remain largely unexplored. The
quality of oil from the major deposits varies considerably. A few
deposits, like the Shengli field, produce low-quality oil suitable
mainly as fuel. Most of the oil produced in China from the big
fields in the north and northeast is heavy, low in sulphur, and has
a very high paraffin content, making it difficult and expensive to
extract and to refine.
Offshore exploration and drilling were first undertaken in the
early 1970s, and it became more widespread and advanced as the
decade progressed. Chinese and foreign oil experts believed that
offshore deposits were extensive and could equal onshore reserves.
Offshore operations relied heavily on foreign technology. In 1982
thirty-three foreign oil companies submitted bids for offshore
drilling rights; twenty-seven eventually signed contracts. By the
mid-1980s, when offshore exploration results were disappointing and
only a handful of wells were actually producing oil, China began to
emphasize onshore development. To continue offshore exploration,
China established the China National Offshore Oil Corporation to
assist foreign oil companies in exploring, developing, extracting,
and marketing China's oil.
Exploration and drilling was concentrated in areas in the South
China Sea, Gulf of Tonkin, and Zhu Jiang (Pearl River) Mouth Basin
in the south, and Bo Hai Bay in the north. Disputes between China
and several neighboring countries complicated the future of oil
development in several promising offshore locations
(see Physical Environment
, ch.2).
Natural gas was a relatively minor source of energy. Output
grew rapidly in the 1960s and 1970s. By 1985 production was
approximately 12 billion cubic meters--about 3 percent of China's
primary energy supply. The following year, output increased by 13
billion cubic meters. Sichuan Province possesses about half of
China's natural gas reserves and annual production. Most of the
remaining natural gas is produced at the Daqing and Shengli
northeastern oil fields. Other gas-producing areas include the
coastal plain in Jiangsu, Shanghai, and Zhejiang; the Huabei
complex in Hebei Province; and the Liaohe oil field in Liaoning
Province.
The exact size of China's natural gas reserves was unknown.
Estimates ranged from 129 billion to 24.4 trillion cubic meters.
The Chinese hoped for a major discovery in the Zhongyuan Basin, a
5,180-square-kilometer area along the border of Henan and Shandong
provinces. Major offshore reserves have been discovered. If
successfully tapped, these could increase gas output by 50 percent.
The largest unexploited natural gas potential is believed to be in
Qinghai and Xinjiang.
A rudimentary petroleum-refining industry was established with
Soviet aid in the 1950s. In the 1960s and 1970s, this base was
modernized and expanded, partially with European and Japanese
equipment. In 1986 Chinese refineries were capable of processing
about 2.1 million barrels a day. By 1990 China plans to reach 2.5
million barrels a day.
In the 1970s, China constructed oil pipelines and improved
ports handling oil tankers. The first oil pipeline was laid from
Daqing to the port of Qinhuangdao; 1,150 kilometers long, it became
operational in 1974. The following year the pipeline was extended
to Beijing; a second line connected Daqing to the port of Luda and
branched off to the Democratic People's Republic of Korea (North
Korea). A pipeline from Linyi in Shandong Province to Nanjing was
completed in 1978, linking the oil fields of Shengli and Huabei to
ports and refineries of the lower Chang Jiang region. In 1986 plans
had been made to construct a 105-kilometer pipeline linking an
offshore well with the Chinese mainland via Hainan Islands.
Data as of July 1987
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