In fact, although China consumed 8 million barrels of oil per day in 2008, it also produced 3.7 million barrels, meeting the shortfall with imports. This oil consumption is expected to grow over the next generation, along with the Chinese economy.
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Reserves in the Republic
China's two largest on-shore oil fields are the Daqing and Shengli fields. Together, these fields have produced 60% of China's production over the last 30 years.
Although it is assumed by analysts that China's growing demand for oil can't be met internally, China is an immense country with 3.7 million square miles of land to explore. This does not include offshore areas that might contain oil and gas. China's national oil companies and several western exploration and production companies are actively exploring for oil in China.
Fortune Oil Plc is exploring the Liulin block in Shanxi Province; the company just announced the tripling of its possible reserves to 84.8 billion cubic feet (bcf).
Noble Energy (NYSE:NBL) is exploring offshore in the Bohai Bay, and has a 57% working interest in a block there. The company currently produces 4,000 barrels per day in China. Also in the Bohai Bay is Anadarko Petroleum (NYSE:APC), which drilled 11 wells there in 2008. Anadarko Petroleum also has a deal with the China National Offshore Oil Company to explore in the South China Sea.
The South China Sea is a contentious exploration area because it is the focus of disputed territorial claims by countries in the area. This has impacted exploration of the potential hydrocarbon resources there, although it is unclear how much oil and gas reserves actually exist; a study conducted by the U.S. Geological Survey back in 1994 pegged total reserves at 28 billion barrels.
The Road Home
Recently, some companies have decided that China was not a core area for exploration, and sold interests in any blocks it had. Ultra Petroleum (NYSE:UPL) sold its interests in Bohai Bay for $223 million back in 2007. The company chose to focus instead on its Pinedale acreage and emerging Marcellus shale properties.
In 2007, BP Inc. (NYSE:BP) suspended work on a pipeline project in the South China Sea after China protested the construction as a violation of its territory.
The conventional wisdom is that China can do nothing to arrest its dependence on imported oil, but all that could change if one or more of the companies actively exploring strike one or more large finds. While any large deposits of hydrocarbons will take years to develop, it might alter the long-term case for bullishness in this commodity. (For more, see our Oil And Gas Industry Primer.)
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