Doing Business With China

Oil Industry

Since the new policy of reform and opening up was adopted in China in the late 1970s, the third development stage of oil and natural gas prospecting has begun. This cross-country prospecting has been conducted in the Tarim Basin, the Junggar Basin and the Turpan-Hami Basin in the west, the continental shelf in the Huanghai Sea and the East China Sea in the east, and the offshore ares in the South China Sea.
During the period from 1979 to 1996, the proven recoverable reserve of China's oil was 1.27 times that of thirty years ago and natural gas 5.5 times. In comparison with that of thirty years ago, the annual output of crude oil increased by 51.5 percent and natural gas 46.5 percent. The annual output of crude oil in 1996 reached 157 million tons (coming to 161 million tons by 1998) and that of natural gas 20.1 billion cubic meters. By that year, twenty bases for oil and gas prospecting and development had been established, and 20-odd large-scale petrochemical industrial enterprises founded with the production capacity of crude oil amounting to 210 million tons per year. As a result, the proportion of oil and gas production in the whole energy sector rose to 19.1 percent from less than 1 percent in 1949.
According to development plans of the oil industry, by 2000 a sound cycle of the resource and production in the sector will be realized so as to maintain a stable growth of oil and gas production. Institutional reform of the existing oil companies and enterprises will be accomplished, making them applicable to the socialist market economy. The income from sales of oil products will double that of 1995 to reach 250 billion Yuan or 300 billion Yuan if possible. The productivity of the sector's labor force should also double that of 1995 to reach the target of 200 tons or more in per capita production of oil and gas.

Status Quo of China's Oil and Gas Resources

Oil
Total Reserves£º94 billion tons
The Final Recoverable£º14 billion tons
The Proven Reserves£º5.28 billion tons
The Proven Rate£º37.5%
The Accumulated Recoverable Total£º3.03 billion tons
The Total Be Still Used£º2.25 billion tons
Annual Output(1997)£º160.74 million tons
Natural Gas
Total Reserves£º3.8 billion cubic m
The Final Recoverable£º1.05 billion cubic m
The Proven Reserves£º95 million cubic m
The Proven Rate£º9%
The Accumulated Recoverable Total£º22.8 million cubic m
The Total Be Still Used£º72.2 million cubic m
Annual Output(1997)£º2.27 million cubic m

International Cooperation of the Oil Sector

While relying upon its own ability to accelerate development, the Chinese oil industry has made a strategy to promote foreign cooperation in developing China's oil and gas resources. In the mean time, it also seeks ways encouraging Chinese enterprises to do oil prospecting overseas.
The international cooperation of China's land oil prospecting started in 1985, when the government opened eleven provinces for foreign investors and operators, which included Jiangsu, Zhejiang, Anhui, Fujian, Guangdong, Guangxi, Guizhou, Yunnan, Hunan, Jiangxi and Hainan. According to international practice, risk-taking contracts were signed by the Chinese and foreign sides on conducting oil prospecting in Fushan of Hainan Province, Dongting of Hunan Province, Boyang of Jiangxi Province, Fuyang of Anhui Province, and Subei of Jiangsu Province.
Since 1993 the Chinese oil industry has accelerated its pace in international cooperation by opening ten provinces more in north China for foreign investors and operators. CNPC, the leading corporation of the sector, organized three public bidding for foreign cooperation in this regard from 1993-1995, which related to 54 areas in 13 basins totaling 402,827 square km. Meanwhile, bilateral negotiations have also been conducted between CNPC and foreign parties over risk-taking oil prospecting, increasing productivity of the old oil fields, developing the new fields of which the recoverable reserves were proven, and technical service in these prospects. By the end of 1997, CNPC had signed forty-four contracts with foreign oil corporations, attracting investment worth US$1.1 billion. According to a contract over oil prospecting in Zhaodong area of the Bohai Bay, oil reserves with commercial value has been discovered, which total 26.57 million tons. By now development of the oil field has begun.
The China National Offshore Oil Corporation (CNOOC) was founded in 1982, which greatly promoted foreign cooperation in prospecting of China's offshore oil fields. By the end of 1997, the corporation had reached 131 agreements with 67 companies from 18 countries and regions. According to the agreements, the foreign companies involved invested US$3.31 billion in risk-taking prospecting plus the development funds totaling US$2.41 billion.
In the same time, CNPC has been actively promoting development of overseas oil resources. By now, it has obtained the licenses in operating oil projects in Canada, Peru, Thailand, Papua New Guinea, the Sudan, and several central Asian countries. Contracts about developing some of the projects have been under negotiation. By the end of 1997, CNPC had signed fourteen contracts through making bids for developing overseas oil fields. In 1997, its output in developing the overseas projects according to quotas came to 520,000 tons. The CNOOC also began its overseas business through purchasing the shares of Indonesia's Malacca oil field.
The international cooperation that the Chinese oil industry is actively engaged in also includes providing technical services to overseas customers and exporting products. The CNPC has singed thirty-five agreements with foreign countries on oil technology cooperation and eight on scientific development. These agreements attracted nearly US$100 million. The machines and equipment in oil industry which are made in China have found market in the United States, Canada, Central America and southeast Asian countries, while the drilling machines are welcomed by Japanese customers.