LAST year, PetroChina announced its Jidong Nanpu discovery in Bohai Bay, which could be China’s biggest oil find in 50 years, at an estimated 7billion barrels.
The potential of the South China Sea could be even greater, and development in the East China Sea looks set to surge ahead after China and Japan clinched a deal over the disputed Chunxiao (Shirakaba, in Japanese) gas field, which has explorable reserves of 63.8million barrels oil equivalent.
“None of deep offshore China has really been drilled,” says David Johnson, head of oil&gas Asia at Macquarie Securities in Hong Kong.
“They’ve known for years the next move in China would be into deeper offshore. They have been planning it. Awilco gives them new, very sophisticated oil rigs. They are also getting something that’s very valuable to them – which is deepwater experience.”
Erica Downs says COSL will also need Awilco’s technology and expertise in its offshore assets abroad, such as Nigeria’s Akpo oil and gas field, which CNOOC operates with Total, of France.
“I think, with CNOOC, there is definitely an interest in getting deepwater capacity,” says Downs.
“There’s always the interest in having the technology – they’re going to have to have a foreign partner for that.”
Signs that Beijing could be seeking to focus energy strategy in line with its stated aim of national energy security came with the launch of the National Energy Administration in July.
Charged with governing the oil, gas, coal and power industries and managing the state oil reserves, the NEA takes over from a host of smaller bureaucracies, but any perception that the NEA will be guiding upstream developments with the complicated and politically structured management of the NOCs is an illusion, says Downs.
“It’s the companies themselves in charge of investments they make. Any guidance they have hasn’t really worked. The companies go where the projects are. The NEA is not going to have any direct control over the companies.”
Despite the existing security of gas supplies, CNPC used the signing of a deal with Ukbekneftegaz to jointly develop Uzbekistan’s Mingulak field in October to talk up China’s energy security aspect as it tied in with the Central Asia-China natural gas pipeline due to come into operation next year.
China’s domestic production of 50billion cu m exceeded consumption of 47billion cu m in 2005, but with the government actively encouraging natural gas use, China is expected to be a net importer before 2020, according to most estimates.