Hong Kong — PetroChina is aiming to grow its gas output at a much faster rate than oil over the next five years as oil companies rush to meet Beijing's call for cleaner fuels, while ageing reserves limit the scope to grow output of oil.
But despite the anticipated growth in oil and gas production by China's biggest upstream company, the incremental volumes would fail to close the gap with China's growing need for energy resources, according to the company's vice chairman Zhang Jianhua.
"Domestic oil and gas resources are not good enough for significant production increases," Zhang said on the sidelines of the company's interim briefing in Hong Kong on Thursday.
Company executives added that while PetroChina was aiming to annually grow its gas output by about 4-5% over the next five years, annual oil production would grow by a modest 1% over the same period.
Zhang added that PetroChina would lift crude oil production in response to the government's calls to speed up exploration and development work in an effort to meet the country's strong domestic demand for fuels.
PetroChina's domestic proven and developed crude oil reserves fell below 9 billion barrels by the end of 2008, from 9.05 billion barrels in 2007. The downward trend has continued since then, hitting 5.18 billion barrels by the end of 2016, although it had recovered slightly to 5.59 billion barrels at the end of 2017, according to filings with the US Securities and Exchange.
The decline was because of ageing of its flagship Daqing oil block. The downtrend is unlikely to be reversed despite new oil discoveries by the company.
The company's domestic crude production fell 1.3% year on year to 363.9 million barrels, or 2.01 million b/d in H1, accounting for 52.3% of China's overall crude output, PetroChina said.
China's crude oil output peaked in 2015 and has been going down since then despite demand for oil growing steadily over the years.
China's apparent oil demand was at 13.49 million b/d in H1, up 2.3% from a year ago, data from S&P Global Platts' Analytics showed.
NATURAL GAS, LNG
PetroChina has set a target to lift domestic natural gas production by 4-5% annually, lagging behind the country's demand growth for gas, an indication that the country would be dependent on imported gas and LNG in coming years.
"We are looking for sustainable production growth of 4-5%," Zhang said.
China's natural gas consumption surged 17.5% year on year in the January-June to 134.80 Bcm. PetroChina's domestic gas production was at 46.71 Bcm, accounting for 60.3% of China's total production. The company's gas output grew at 2.5% year on year, falling behind the country's growth level at 4.9%.
Vice president Ling Xiao said PetroChina imported 24 Bcm of natural gas from central Asia, 2.2 Bcm from Myanmar and 9.4 Bcm of LNG in H1 in order to meet domestic demand. This pushed up its total import volumes by 8.92 Bcm from H1 2017 to 35.6 Bcm.
To ensure supplies in the coming winter, which is the peak consumption season in China, PetroChina had signed contracts with domestic buyers to supply 84 Bcm of gas, which would be sourced through a combination of domestic output and LNG imports, Ling added.
LNG is playing an increasingly important role in China's energy security. China surpassed South Korea as the world's second largest LNG importer in 2017 -- its LNG demand is on track to hit 47 million mt in 2018 and could exceed that of Japan by 2030, as Beijing seeks to raise the proportion of gas in the country's energy mix to 15%, according to S&P Global Platts Analytics.
The country's spot requirements are also growing, as its contracted obligations rise at a much slower rate than its demand projections, meaning Chinese importers will play an increasing role in global LNG market fundamentals and prices.
--Oceana Zhou, email@example.com
--Edited by Maurice Geller, firstname.lastname@example.org