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Offshore Oil and Gas Industry
China National Offshore Oil Corporation (CNOOC) is responsible for developing China's rich offshore oil and gas reserves. CNOOC explores and develops offshore oil and gas, and processes and sells these products by itself or jointly with foreign entities. CNOOC is a well-equipped, highly efficient international petroleum corporation with a staff of 30,000.
CNOOC subordinates include the Bohai Sea Petroleum Corporation, the South China Sea Petroleum Corporation, the West Petroleum Corporation, the East China Sea Petroleum Corporation, over a dozen of professional contract companies, and manufacturing entities, research centers, and research institutes. In more than 10 years it has discovered in excess of 20 oil-and gas-bearing formations and h as developed 17 offshore oil and gas fields.
In 1996, CNOOC produced 15 million tons of crude oil and 3 billion cubic meters of offshore gas. These totaled 18 million tons of oil and gas, 10 million tons more than in 1995, or about 81 percent of China's annual increase in crude oil. Also in the year the corporation produced 390,000 tons of crude oil in Malacca.
It is estimated that between 1996 and 2000 CNOOC's annual offshore production of crude oil will stabilize at 14 million tons and its offshore annual output of gas will reach 8-10 billion cubic meters.
Given shrinking land oil reserves and slow increases in output from old land oil fields, China's offshore petroleum industry is being rapidly developed. During the Seventh Five-Year Plan (1985-1990), offshore oil production increased about 500,000 tons annually. The annual increase went up to 1.5-2 million tons during the Eighth Five-Year Plan (1991-1995). So it can be said that China's oil increases were largely provided by increased offshore crude oil. The offshore petroleum industry is becoming increasingly important to China's national economy.
Developing offshore petroleum is an expensive, high-risk operation that applies advanced science and technology. The world's first offshore oil well was drilled in the waters off California in 1857.
In the 1960s and 1970s China had been confined to traditional ways of production and exploration. After 10 years China's total output of offshore oil was below 1 million tons. By the end of the 1970s, China had developed only three offshore oil fields covering 3 million square kilometers.
China's offshore petroleum industry has developed rapidly since CNOOC was established in 1982. From 1982 to 1996, its annual output of offshore crude oil increased from 80,000 tons to 18 million tons. The United States took 20 years t o produce 10 million tons of offshore crude oil annually; the former Soviet Union required 25 years. In the past 14 years CNOOC produced a total of 46.35 million tons of crude oil and 3.67 billion cubic meters of gas.
CNOOC has helped stabilize China's domestic oil and gas supplies. In 1996, its offshore output of oil reached 15 million tons; gas reached 3 billion cubic meters. China's 13 offshore oil and gas fields have profit margins of 40 percent. By the year 2000, CNOOC expects to have paid its debts of US $400 million and RMB 4 billion.
CNOOC has developed 19 large offshore oil and gas fields to modern, international standards. Huge tanker ships and the roar of machinery break the silence in over 40 areas open to the outside. CNOOC explores, develops, produces, and sells oil and gas in China's offshore waters with management near that of international oil companies.
Wang Yan, general manager of CNOOC, said, "Our technology is in step with the world's offshore petroleum industry." China can successfully develop huge, offshore, thickened oil fields with reserves in excess of 100 million tons as well as small, offshore oil fields with reserves of only several million tons.
China has 1.2 billion tons of proven offshore crude oil reserves and 200 billion cubic meters of proven offshore gas reserves. The Bay of the Bohai Sea alone has proven oil reserves of 600 million tons. One medium-sized oil and gas field discovered in the intertidal zone of the Bay of Bohai Sea has geological reserves estimated at 50 million tons.
According to Chinese experts' explorations, the South China Sea is rich in oil and gas. Gas reserves are estimated at 13 trillion cubic meters; oil reserves at 10.2 billion tons. Oil and gas reserves are concentrated in the offshore waters around Hainan Island. Four oil-and gas-bearing structures have been discovered there: the Beijingwan, Yinggehai, Qiongdongnan, and Zhujiangkou basin s.
Good news has come from oil and gas explorations in these offshore waters around Hainan Island. The South China Sea Petroleum West Corporation drilled at test well, "Oriental 1-1-5," and gained productive oil and gas flows in the Yinggehai Basin to the west of Hainan Island. This supports experts' beliefs that the "Oriental 1-1" structure alone contains geological gas reserves of 40-60 billion cubic meters.
The State Council closely supervises the development of China's offshore petroleum industry. It has allowed CNOOC to build power stations and fertilizer plants and to purchase offshore oil and gas at international prices for use in these industries.
Most CNOOC employees who work on offshore production have international professional certification. Many of them have received training abroad. On March 1 8, 1996, CNOOC sent its first expert advisory group to Kazakstan. This group introduced China's model of external cooperation between CNOOC and foreign entities and provided up-to-date gas and oil exploration techniques.