Oil focus shifting to Xinjiang

Oil focus shifting to Xinjiang

BEIJING - For the entire history of the Chinese oil industry, eastern fields have been the main contributors to production, while the northwest Xinjiang Uygur Autonomous Region, with its rich reserves, took the role of a strategic substitutive zone.

But nowadays, there are signs that the country is shifting its main focus of oil and gas resource development westward, as marked by capital flows in the energy field and remarks of senior officials. Together, these developments imply that the position of Xinjiang as a substitutive zone is gradually shifting to that of a main contributor to the country's energy supply. Recently, Xinjiang has become the focus of attention by the government and oil enterprises, as the country now depends on imports for 45% of its oil supply, and it has become increasingly urgent to speed up the development of domestic oil and gas resources.

In late June, Vice-Premier Zeng Peiyan and officials from the State Development and Reform Commission, the Ministry of Land and Resources, and China's top oil giants China National Petroleum Corporation (CNPC) and China Petrochemical Corporation (Sinopec), attended a seminar in Xinjiang on the oil and gas development situation in Tarim, Xinjiang. They all held that the time is now ripe and the conditions are basically ready to speed up energy construction in Xinjiang, saying that Xinjiang should be built into a strategic base of oil and gas resources in the coming few years so as to narrow the country's oil and gas shortfall. Xinjiang's Tarim, Junggar and Turpan-Hami basins are home to 20.9 billion tons of oil resources and 10.85 trillion cubic meters of natural gas, respectively accounting for 25.5% of China's inland oil resources and 27.9% of the country's inland gas resources.

In 2004, Xinjiang produced 22.60 million tons of crude oil. Related sales and profits hit 40.5 billion yuan (US$5 billion) and 19.5 billion yuan respectively. All three figures were record highs. Since 1990, the oil output in Xinjiang has been increasing by 1.11 million tons annually on average. According to the preliminary plans of CNPC and Sinopec, the region's oil and natural gas output will hit 30 million tons and 18 billion cubic meters, respectively, by 2010. Combined with the 20 million tons of crude oil imported from Kazahkstan via pipelines, Xinjiang will become the country's largest oil and gas supply base by then.

The Tarim Basin is estimated to have 10.7 billion tons of oil reserves and 8.39 trillion cubic meters of natural gas reserves. At present, the verified rate is only 8% for oil and less than 10% for natural gas. Tarim's crude output will top 10 million tons in 2005.

Earlier, CNPC and Sinopec announced that they would invest 20.85 billion yuan this year in upstream oil and gas prospecting and exploration in Xinjiang. Aside from acceleration in oil and gas prospecting and exploration, China is also speeding up the construction of facilities for transmitting oil and gas from Xinjiang to other parts of the country.

'Thick oil' fields coming on line
Xinjiang has acquired an annual thick oil production capacity of 3.2 million tons to become a major thick oil production and processing base in China.

"Thick oil" refers to high-viscosity, large-molecule petroleum which is a solid at room temperature; while commercially usable, this grade of oil requires special techniques to extract and refine. China is rich in thick oil reserves. The Junggar Basin boasts an estimated 900 million tons of thick oil reserves, with 250 million tons already proven. At the current production level, the thick oil reserves at Junggar are enough to be mined for at least 30 years.

PetroChina's Xinjiang Oilfield produces 3 million tons of thick oil annually, making up one third of the total output in China. This is processed by Karamay Petrochemical, Urumqi Petrochemical, and Dushanzi Petrochemical, with a total throughput of about 2.3 million tons, and by Lanzhou Petrochemical, which produces 700,000 tons.

A thick oil processing station was completed in June at Lunsan in the Tarim Oilfield in the southern part of the Xinjiang Uygur Autonomous Region, making it possible for the oilfield to extract thick oil by blending it with thin oil. The station integrates oil and gas treatment, fire control and wastewater treatment and is capable of handling 200,000 tons of thick oil a year.

(Asia Pulse/XIC)