China’s Domestic Exploration Costs Surge – Woodmac

Despite concerns about intensifying competition between China and the West for energy resources, China’s listed oil trio increased their spending on domestic exploration and production from 2004 to 2006 by more than their total international expenditure last year.

Although their spending appears to be paying off, with discoveries such as the Nanpu oil and natural gas strike by PetroChina in Bohai Bay, Norman Valentine, senior corporate analyst at Wood Mackenzie, said China is unlikely to raise overall domestic oil supply substantially.
Many of China’s oil fields are showing signs of age, with crude output at PetroChina’s flagship Daqing field, which has been in production since 1963, falling 3.5% last year after declining 3% in 2005.

Valentine said the most dramatic impact of the recent finds was likely to be on China’s plans for natural gas, with the companies becoming more selective about pursuing some more speculative projects for piped natural gas or foreign liquefied natural gas.

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