DISCOVERING MORE OILFIELDS: Oil production is in progress at Shengli Oilfield. In September 2009, exploration teams discovered a new oilfield—Qiaodong Oilfield—in the locality

With its rapidly expanding economy, China is facing a growing demand for oil and other limited natural resources. While the country has become increasingly dependent on imported resources, two recently discovered oil deposits in its own backyard will help alleviate its oil shortage.

Earlier this year, the Geophysical Exploration Co. of the Zhongyuan Petroleum Exploration Bureau discovered an oilfield with reserves of about 140 million tons in Chaogewunduer Town, located near Urad Rear Banner in the Inner Mongolia Autonomous Region.

The company's exploration team began collecting field information on the surrounding area of 388 square km in May. As it stands, the explored oil reserves of the area, sitting around 140 million tons, are of high quality and have a high value of exploitation. The company says that the first-phase of exploration has been completed, allowing exploitation to commence sometime next year.

In mid-September, the exploration team of Shengli Oilfield in Shandong Province discovered another new oilfield, named Qiaodong Oilfield, with reserves of 10 million tons near the estuary of the Yellow River. The oil reservoir, lying 3,000 meters underground, is expected to produce 100,000 tons of oil annually.

Discovery of the two oilfields raises China's verified oil reserves to 4.3 billion tons.

Sun Baojiang, professor at China University of Petroleum, says that continued exploration and discoveries have raised China's oil reserves steadily over the past few decades. The country's verified oil reserves have been growing at an average annual speed of 200-300 million tons in the past 10-odd years.

Advanced technologies

The application of advanced technologies has facilitated the discovery of new oilfields.

When its first large oilfield, Daqing Oilfield, was discovered in northeast China, China adopted the continental theory of petroleum origin, where only an analysis of rock level samples could confirm if an area contained oil reserves, according to Sun. Due to the procedures involved, the method took at least one or two years to produce results about an area's oil potential. Chinese geologists had spent five years in exploration before discovering Daqing Oilfield.

But now, the three dimensional seismic exploration technology has become the main means for the quick and concise exploration of oilfields. With this technology, geologists can analyze whether an area has oil reserves from the underground information supplied by artificial seismic waves. By utilizing this method, the Geophysical Exploration Co. of the Zhongyuan Petroleum Exploration Bureau had spent just three months before making the oilfield discovery in the Inner Mongolia Autonomous Region.

Aside from sophisticated exploration technology, Chinese oil companies also lead the world in advanced oil well exploitation technologies. In the early stages of development, specifically at Daqing Oilfield, oil was forced to the surface on its own pressure, which had built up from its location beneath the Earth's surface for millions of years, resulting in a classic gushing oil well. When oil could not rush to the surface on its own due to a lack of pressure, water was used to flood the oil well to boost pressure. However, this method presented the problem of high water content in the oil.

Research and development, taking lessons from the procedural inadequacies of Daqing Oilfield, resulted in a chemical technology of multifunctional macromolecule surfactants.Compared to technologies that "pump up" oil with layer pressure or "squeeze out" oil by flooding the wells, the new technology will "wash out" more oil with chemical surfactants.

Application of this new technology increased the comprehensive recovery rate at Daqing Oilfield to over 50 percent, 10-15 percentage points higher than the world average. Considering the oilfield's 5 billion tons of reserves, if the recovery rate is increased by only 1 percentage point, the output can rise 50 million tons.

The new technology now used by many oil- drilling and exploiting operations in China, has led to a substantial increase in oil output. In 1949, when the People's Republic of China was founded, the country's crude oil output was only 120,000 tons. In 1978, with its crude oil output surpassing 100 million tons for the first time, China became a major world oil producer. In 2008, the country's crude oil output hit 190 million tons, 1,583 times that of 1949, ranking fifth in the world.

With advanced technologies, Chinese oil companies have explored a way of "swapping technologies for resources" in their international operations. Currently, more than 300 teams from Daqing Oilfield are working in 28 countries and regions worldwide, such as Iran, Sudan, Venezuela, Kazakstan and Indonesia.

Wang Zhen, Director of the China Energy Strategic Research Institute, says that thanks to 50 years of efforts, Chinese oil industry has accumulated state-of-the-art technologies and become more competitive globally.

Technological development for new means of oil exploitation has continued. Currently Daqing Oilfield is busy tackling "the quaternary oil recovery technology," where biological engineering procedures will be used to exploit crude oil remnants in old wells. The residual crude oil will be exploited in the form of natural gas, a method that is not employed in other countries.

New oilfields

Although the proven reserve of oil is increasing yearly, China's oil output still cannot meet the market demand.

China Energy Development Report 2009 released by the National Energy Administration of the National Development and Reform Commission on July 29 estimates that in 2009, China's crude oil output will reach 193 million tons, a year-on-year increase of 2.1 percent. But last year China consumed more than 390 million tons of oil, forcing it to import 207 million tons to meet its demand, with the import volume growing 2.1 percent over the previous year.

To date, more than 50 percent of China's oil consumption relies on imports.

The report also estimates that in the next two years, China's oil supply will remain at a low growth level, while the Chinese Academy of Social Sciences estimates that between 2010 and 2020, Chinese oil demand may increase at an annual rate of 3.3 percent. Based on the production capacity in 2009 (480,000 tons per day), in two years' time, China will need to import 5.67 million tons of oil every day to maintain socioeconomic operations.

As for oil production, oilfields in east China are reducing their output, while the development of oilfields in west China is slower than anticipated. In addition, output from offshore oilfields is falling behind expectations. As a result, Chinese oil output is unlikely to increase markedly in the immediate future.

It is estimated that in 2010 and 2015, China's crude oil output will reach 177-198 million tons and 182-200 million tons, respectively, indicating a low growth rate. By 2020, the country's crude oil output is expected to remain around 181-201 million tons, and begin to see an annual decrease in ensuing years.

According to the "national oil and gas resource appraisal" carried out by the Ministry of Land and Resources (MLR), China's prospective oil reserves stand at 108.6 billion tons.

Sun noted, aside from the call to save energy and develop new energy alternatives, China needs to strengthen its efforts to explore and discover more oilfields.

In fact, the Chinese Government has also required related departments to intensify their efforts in oil exploration. The MLR stated in the National Plan on Mineral Resources it released earlier this year that to alleviate the shortage of oil supply, China will need to discover six 100-million-ton oilfields and six to eight 100-billion-cubic-meter gas fields by 2010. From 2011 to 2015, China will need to discover 10 oilfields of 100 million tons and eight to 10 gas fields of 100 billion cubic meters.

If the planned goals of the MLR can be realized, China's recoverable oil reserves will double in the next five years.

China's First Large Oilfield Celebrates 50th Anniversary

Located in the west of Heilongjiang Province, Daqing Oilfield is the first large oilfield discovered in China.

With a history of 50 years, the oilfield began production on September 26, 1959, marking the beginning of the Chinese oil industry and breaking the conclusions of foreign experts that "China is an oil-poor country." The oilfield is vitally important to the country's self-support of oil and has exerted great influences on China's industrial development. A whole set of independently created exploration, exploitation and supporting technologies have been developed in the 50 years since the oilfield's opening, many of which are of the most advanced level in the world.

As the largest oilfield in China, its crude oil output in 1963 was only 4 million tons. In 1966, its output surpassed 10 million tons, with a surplus after satisfying domestic demand. In 1976, Daqing Oilfield produced more than 50 million tons of crude oil, maintaining a high output level for 27 years. By March 22, 2009, the oilfield had produced a total of 2 billion tons of crude oil, accounting for more than 40 percent of the country's aggregate crude oil output from land oilfields.

Future plans entail Daqing Oilfield, when ensuring the steady production of crude oil, strengthening its efforts in the exploitation and utilization of natural gas. Plans include increasing the output of natural gas to 8-10 billion cubic meters by 2020, a three-fold rise from that of 2008. At present, Daqing, with verified natural gas reserves of more than 1 trillion cubic meters, is China's fifth largest inland gas field.