Daqing Oilfield produced 30.87 million tonnes of oil equivalent (829,000 boepd) from its domestic and foreign operations in the first nine months of the year, Xinhua reported on November 28.
The company, which operates one of China’s largest oil complexes in the northeastern Heilongjiang Province, is a subsidiary of leading oil and gas producer PetroChina.
Daqing Oilfield produced 23.89 million tonnes (641,000 bpd) of crude oil from its domestic assets, which also delivered 3.1 bcm of natural gas. The company’s overseas fields produced 4.5 million toe (121,000 boepd).
Revenue grew 15.4% in the period, while profits soared by 184.6% year on year, Xinhua reported without providing exact figures.
Daqing Oilfield has begun looking to expand its activities overseas as the company draws down investment in the former supergiant Daqing oilfield. The complex was discovered in 1959 and eventually saw crude production peak at more than 50 million tpy (1 million bpd). However, natural declines forced the company to invest heavily in enhanced oil recovery (EOR) techniques to maintain production levels in recent years. These efforts included implementing a polymer-enhanced waterflooding system and finding particular success using an alkaline-surfactant polymer (ASP) technique.
Daqing came on stream in 1960, with output peaking at 52.4 million tonnes (1.05 million bpd) in 1983. The field produced around 50 million tpy (1 million bpd) for 27 years, until 2002 when a managed reduction to around 40 million tpy (800,000 bpd) began, where it remained until oil prices collapsed in 2014.
With a water cut at above 94%, the oil price crash forced PetroChina to rationalise Daqing’s output. Production from the field slid from 36.56 million tonnes (734,000 bpd) in 2016 to 34 million tonnes (680,000 bpd) in 2017.
The field’s operator had said in 2014 that it would gradually reduce Daqing’s output to 32 million tpy (640,000 bpd) by 2020, when it would enter its next managed plateau. But these latest figures show that PetroChina’s managed reduction in production has been handled more quickly than expected.
It is not clear what the next step will be for the field. Given its heavy cost of development, from a business perspective it would make more sense for Daqing Oilfield to allocate more capital expenditure to its foreign assets. The unit increased overseas equity oil production by 14% year on year in 2017 to 5.52 million tonnes (111,000 bpd). But China’s domestic output is not governed by commercial imperatives alone.
While the government was content to allow PetroChina, Sinopec and CNOOC Ltd to curb expansive output following the 2014 price crash, Chinese President Xi Jinping called on the majors in August to invest more heavily in bolstering the country’s domestic oil and gas production in the name of national energy security. Prices have recovered significantly since their 2016 lows.
The International Energy Agency (IEA) forecast earlier this year that China would be dependent on foreign oil for approximately 75% of its domestic energy needs by 2023.
China’s imports have fallen from a 2015 high of 4.31 million bpd to an average of 3.78 million bpd in the first 10 months of this year. Despite the steep fall, national crude output appeared to stabilise in August 2017 at 3.77 million bpd and it has stayed around that level for more than a year.
The country has not made a world-class oil discovery in decades, however, which leaves its mid- to long-term upstream outlook at risk.
While this is a challenge for the country’s energy planners, for oil exporting countries it has created lucrative opportunities. Exporters are already vying for market share in the world’s largest oil importer, which purchased a record 9.65 million bpd in October.
Reuters reported this week that Saudi Arabia was poised to expand its market share in China next year for the first time since 2012. The Middle Eastern oil giant had lost ground to Russia, whose ESPO export grade is preferred by the country’s independent refiners. But the start-up of new refinery capacity in 2019 that is geared towards Saudi crude should increase Chinese demand for kingdom’s offerings by between 300,000-700,000 bpd, industry observers told the newswire.