Technological and Industrial History of The People's Republic of China - Energy Industry - Oil

Oil

Before 1949 China imported most of its oil. During the First Five-Year Plan it invested heavily in exploration and well development. In 1959 vast reserves were discovered in Songhua Jiang-Liao He basin in northeast China. The Daqing oil field in Heilongjiang became operational in 1960. Daqing was producing about 2.3 million tons of oil by 1963, and it continued to lead the industry through the 1970s. Further important discoveries, including the major oil fields of Shengli, in Shandong, and Dagang, in Tianjin, enabled China to meet domestic needs and eliminate nearly all imports by the mid-1960s. In 1973, despite a steadily growing internal demand for petroleum products, output was large enough to export 1 million tons of crude oil to Japan. Exports increased to 6.6 million tons in 1974 and reached 13.5 millions tons in 1978. In 1985 exports of crude oil amounted to approximately twenty million tons, roughly 16 percent of total production. The majority of 1985 exports were to Japan, but the government also had released increasing quantities on the spot market and sent some to Singapore for refining. Although the government temporarily abandoned its drive to broaden its oil export base in 1986, 131 million tons of crude oil still were produced, an increase of 5.8 million tons over 1985.

Oil reserves are large and widely dispersed. In general, development is concentrated on deposits readily accessible from major industrial and population centers. Deposits in remote areas such as the Tarim, Junggar, and Qaidam basins, remain largely unexplored. The quality of oil from the major deposits varies considerably. A few deposits, like the Shengli field, produce low-quality oil suitable mainly as fuel. Most of the oil produced in China from the big fields in the north and northeast is heavy, low in sulfur, and has a very high paraffin content, making it difficult and expensive to extract and to refine.

Offshore exploration and drilling were first undertaken in the early 1970s, and it became more widespread and advanced as the decade progressed. Chinese and foreign oil experts believed that offshore deposits were extensive and could equal onshore reserves. Offshore operations relied heavily on foreign technology. In 1982 thirty-three foreign oil companies submitted bids for offshore drilling rights; twenty-seven eventually signed contracts. By the mid-1980s, when offshore exploration results were disappointing and only a handful of wells were actually producing oil, China began to emphasize onshore development. To continue offshore exploration, China established the China National Offshore Oil Corporation (CNOOC) to assist foreign oil companies in exploring, developing, extracting, and marketing China's oil.

Exploration and drilling was concentrated in areas in the South China Sea, Gulf of Tonkin, and Pearl River Mouth Basin in the south, and Bohai Bay in the north. Disputes between China and several neighboring countries complicated the future of oil development in several promising offshore locations.