In a move to strengthen China’s energy security, the country is setting up a new state-backed entity that will focus on exploring and developing ultra-deep oil and gas reserves, as well as tapping into harder-to-extract unconventional resources.
The new body, which is being established at the behest of President Xi Jinping, will bring together the country’s two dominant oil and gas producers, China National Petroleum Corporation (CNPC) and Sinopec, along with seven other state-owned groups, including China Aerospace Science and Industry Corp, Baowu Steel Group, and Minmetals.
“This…is to gather wisdom and strength to jointly build an industry chain from ultra-deep oil and gas exploration to development to engineering,” CNPC said in a statement on its website.
The new entity will concentrate on drilling conventional resources at ultra-deep wells, which can extend as deep as 10,000 meters (6.21 miles) below the surface, particularly in the Tarim Basin region in northwest Xinjiang, where CNPC and Sinopec are major players. It will also focus on tapping into deep shale oil and coal-seam gas resources.
China, the world’s largest crude oil importer, relies on imports for nearly three-quarters of its oil needs. The country has been investing heavily to maintain its domestic crude oil production above 4 million barrels per day, a level considered essential to power its manufacturing activities and military operations.
Despite years of efforts by state oil majors to drill deeper onshore and accelerate offshore development, China’s oil output has only grown by around 2% per year since 2018. This is due in part to declining production at large mature fields, as well as the geological and cost challenges of extracting shale oil and gas resources.
By establishing this new state-backed entity, China aims to harness the collective expertise and resources of its leading industrial groups to tackle the technical and financial hurdles of exploring and developing ultra-deep and unconventional oil and gas reserves, thereby enhancing the country’s long-term energy security.