China scrambles to boost oil output
Oil giants led by Sinopec invest heavily overseas as consumption rises and domestic fields age
The mainland's biggest state-owned oil companies, sitting on ageing fields, are scrambling to ramp up crude oil and natural gas production to meet surging domestic demand through a slew of investments that also risk pushing up their costs.
PetroChina, Sinopec and CNOOC produced more oil and gas in the first nine months of this year, they said in the past week.
That was partly in response to the government's recent rise in domestic natural gas prices and moves to link pump prices more closely with international crude costs.
The increase, however, is far from enough to bridge the gulf between the energy consumption and production of China, which last month overtook the United States to become the world's largest oil importer.
As domestic oilfields age, the three companies have in recent years poured billions of dollars - the biggest amount in the world so far - into the acquisition of unconventional and traditional hydrocarbon assets overseas, to boost reserves.
They have also invested heavily in risky projects such as deepwater drilling at home and abroad.
These investments, which mirror a trend in the global oil industry, will increase costs but, so far, not at the expense of profits.
PetroChina and Sinopec both reported on Tuesday net profit growth of about 20 per cent in the third quarter.
"There is a lot of incentive for China to produce as much oil as it can domestically," said Simon Powell, the head of Asia oil and gas research at brokerage CLSA, citing the country's soaring oil imports.
The mainland's oil consumption last year rose 5 per cent to 10.2 million barrels a day from 2011, according to BP's Statistical Review of World Energy, a figure that was the highest since the energy major started compiling data in 1965.
By contrast, oil production increased 2 per cent to 4.2 million barrels a day, the review shows.
China, the world's second-largest oil user, already relies on imports for 60 per cent of its consumption and is set to double its fuel use by 2030.
PetroChina, the country's dominant oil and gas producer, saw its output rise 4.3 per cent year on year in the first three quarters.
Crude oil production edged up 2.2 per cent to 698 million barrels, while natural gas output jumped 9 per cent, the company said on Tuesday.
But higher costs and lower realised crude prices in the period meant operating profits for its exploration and production division fell 10 per cent, it said.
Analysts said the rise in costs was partly due to PetroChina's efforts to stem output decline at its ageing oilfields, including Daqing, the country's largest.
PetroChina is now expected to allocate more resources to exploration and production, while cutting spending on refining, petrochemicals and businesses with lower profitability.
Sinopec posted a 4 per cent rise in oil and gas output in the January-September period.