China is setting up a new entity that groups together domestic oil producers and other state-owned companies to explore for ultra-deep oil and gas reserves and tackle harder-to-extract unconventional resources, state energy group CNPC said Monday.
The initiative responds to President Xi Jinping’s call for the sector to have “new productive forces” that will contribute to the country’s energy security, CNPC said on its website.
In addition to CNPC and Sinopec, the country’s two main oil and gas producers, the new body brings together seven other state groups, including China Aerospace Science and Industry Corp, the Baowu steel group, the equipment manufacturer Sinomach, Dongfang Electric Group and Minmetals.
“It is about gathering wisdom and strength to jointly build an industrial chain from ultra-deep oil and gas exploration to engineering and development,” CNPC said.
The group will drill for conventional resources in very deep wells that extend up to 10,000 meters (6.21 miles) below the surface in places like the Tarim Basin region of northwest Xinjiang, where CNPC and Sinopec are major players. It will also seek to exploit deep shale oil and coal seam gas resources.
China is the world’s largest importer of crude oil, relying on imports for nearly three-quarters of its needs. It has invested billions of dollars to keep its domestic crude production at more than 4 million barrels per day, a level deemed necessary to fuel manufacturing and military services.
Years of efforts by the state’s oil majors to drill deeper onshore and accelerate development of offshore oil fields have driven production growth of 2% a year since 2018.
That said, state-owned companies must contend with declining production from mature major fields. They also face the geological and financial challenges of extracting shale oil and gas.
