Fast Market Research recommends "China Oil & Gas Report Q1 2013" from Business Monitor International, now available
Boston, MA -- (SBWIRE) -- 03/19/2013 -- BMI View: While China is increasingly dependent on energy imports - particularly gas - owing to rapid growth in energy demand, there is considerable upside potential from its unconventional gas resources. A more open environment to foreign investment is needed in order to meet the ambitious production targets set by the state, especially if its vast unconventional gas resources are to be maximised. In the meantime, oil and gas demand could surprise to the downside if economic expansion comes under pressure.
The main trends and developments we highlight for China's oil and gas sector are:
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- Much of the country's upside production potential will come from increased production from fields yet to reach peak capacity, such as Tarim. Enhanced oil recovery (EOR) measures will also help to maintain production levels at older fields, such as PetroChina's Daqing and Sinopec's Shengli. We expect Chinese production to rise over the next few years, peaking at 4.48mn barrels per day (b/d) in 2016 before declining to 4.36mn b/d in 2021.
- A slowdown in economic growth makes it unlikely for a reform in China's fuel price mechanism in the short term, as it could bring up domestic fuel prices and run counter to the government's aim of stimulating economic growth. This could decrease the willingness of refiners to expand China's refining capacity, given the loss they are incurring from their downstream operations - a result of buying crude feedstock at high international prices and selling refined products at low state-mandated rates. Hence, we forecast a slower rise in China's refining capacity than in the previous decade, from 10.4mn b/d in 2012 to 12.4mn b/d by 2016.
- As a weak global economy and troubles in its export markets contribute to slower economic growth in China, the rate of oil consumption growth is likely to decelerate as well. BMI forecasts that Chinese oil demand should reach 10.4mn b/d by 2016. Consumption should grow to 12.1mn b/d by 2021.
- A report by China's Ministry of Land and Resources has estimated China's technically recoverable shale reserves at 25.1trn cubic metres (tcm). This is significantly lower than the 36.1tcm estimate made by the US Energy Information Administration (EIA) in April 2011. The discrepancy reflects the limitations of resource estimations at such an early stage of appraisal. Further changes in reserves estimates are therefore likely as operators' understanding of China's various shale basins improves.
- The ministry's report considered a number of barriers to realising this vast shale gas potential. In particular, it highlighted China's complicated geology and lack of domestic technological expertise. In view of these challenges, we expect shale gas production to only slowly make its impact felt by 2018. Gas production will continue to grow, based on conventional and deepwater production, from an estimate of 108.4bn cubic metres (bcm) in 2012 to 130.5bcm in 2016.
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