China Launches New Entity to Drill Deep for Oil and Gas

State Firms Unite to Explore Ultra-Deep Reserves and Non-Conventional Resources

by Victor Adetimilehin

China is forming a new entity combining national oil producers and other state firms to explore ultra-deep oil and gas reserves and tackle non-conventional resources. The move follows President Xi Jinping’s call for new productive forces to enhance the country’s energy security, state energy group CNPC announced on Monday.

The new body will include key players like CNPC and Sinopec, China’s leading oil and gas producers, along with seven other state groups such as China Aerospace Science and Industry Corp, Baowu Steel Group, Sinomach, Dongfang Electric Group, and Minmetals.

Unified Efforts for Enhanced Exploration

“This initiative aims to pool wisdom and strength to create a comprehensive industry chain from ultra-deep oil and gas exploration to development and engineering,” CNPC said on its website. The group plans to drill conventional resources at depths reaching 10,000 meters (6.21 miles) below the surface in regions like northwest Xinjiang’s Tarim basin, where CNPC and Sinopec are significant players. They will also target deep shale oil and coal-seam gas resources.

China, the world’s largest crude oil importer, depends on imports for nearly three-quarters of its oil needs. The country has been investing billions of dollars to maintain domestic crude oil production above 4 million barrels a day, a level deemed necessary to support manufacturing and military activities. Efforts by state oil majors to drill deeper onshore and accelerate offshore development have resulted in an annual output growth of 2% since 2018.

However, state firms face challenges like declining output from large mature fields and the geological and cost difficulties of extracting shale oil and gas resources.

Addressing Energy Security and Production Challenges

The creation of this new entity is a strategic response to these challenges. By leveraging the expertise and resources of multiple state firms, China aims to enhance its ability to discover and develop hard-to-reach oil and gas reserves. This collaboration is expected to provide a more robust approach to securing the nation’s energy supply.

China’s focus on energy security is evident in its continuous investment in both traditional and non-conventional energy sources. The collaboration among state firms represents a concerted effort to overcome the technical and economic barriers associated with ultra-deep drilling. This initiative is not just about increasing production but also about ensuring that China remains resilient against global energy market fluctuations.

Future Prospects and Strategic Implications

The new entity’s efforts are anticipated to boost China’s domestic energy production, reducing its reliance on imports and enhancing energy independence. The integrated approach to ultra-deep drilling and resource development is a forward-thinking strategy aimed at sustaining long-term energy security.

While the path to achieving these goals is fraught with challenges, the collaboration of these major state firms symbolizes a significant step toward addressing them. The outcome of this initiative will likely have substantial implications for China’s energy strategy and its position in the global energy market.

As the new entity begins its work, the focus will be on leveraging the combined expertise and resources of its member firms to tackle the complexities of ultra-deep and non-conventional resource exploration. The success of this venture will be crucial for China’s future energy landscape, potentially setting a benchmark for similar initiatives worldwide

Source: Reuters

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