China: Far East Measures In As Heavy Oil Hotspot

After spending considerable time investing in Canadian and Venezuelan heavy oil ventures, China is looking to its own oil fields as a next source of production. To date, heavy oil has been discovered in 70 oil fields throughout 12 basins. All of these sources have remained largely unexploited.

According to the Vice President of the China National Petroleum Corporation Zheng Hu, China holds 19.8 billion tons of onshore heavy oil. In 2006, China’s production of heavy oil reached 23.86-million tons, representing 13.2% of China’s overall oil production. As China’s crude oil production declines and the country faces increasing energy shortages, heavy oil will emerge as an important substitute for conventional oil products.

The Chinese government also plans to adopt new policies to encourage the exploration and development of unconventional oil resources, Director of the National Development and Reform Commission Ma Kai told one source. In fact, the country’s 11th five-year plan includes stipulations concerning developing unconventional oil and gas resources as a necessary step in meeting the country’s voracious energy appetite.

Onshore Heavy Oil
With exploration and development spanning 13 districts and 35 counties, the largest heavy oil production field in China is the onshore Liaohe field, which covers an area of 112,800 square miles in the southwest of the Liaoning province in northeast China.

Exploration in Liaohe began in 1955. More than 10 years later, oil began to flow. Since this discovery, 36 oil fields have been found, 26 of which have been developed. Liaohe is dominated by heavy oil, accounting for more than 50% of its total oil reserves. With nine production bases already, China National Petroleum Corp (CNPC) plans to build another that will be the largest heavy oil processing base in the country. Through CNPC’s subsidiary PetroChina Liaohe Petrohemical Company, heavy oil production estimates place the field’s production at 5 million tons annually, increasing one million tons each year from 2006.

While overall oil production in China has been on a decline, Liaohe field is using new computing technologies that process seismic data faster and from larger areas to accelerate the exploration and discovery of new reserves. Other developments on the field include the use of boiler flue gas. The boiler flue gas, which contains 12-13% carbon dioxide, is pumped into an oil well and then the well is closed for a few days. Using a combination of steam and the CO2 blue gas, oil production increased by 50 to 60%.

Offshore Heavy Oil
China’s largest offshore heavy oil field is the Bohai Bay. While the estimated onshore oil reserves account for approximately 20% of China’s oil, it is unclear how much heavy oil lies in offshore fields, according to Jia Chengzao, vice president of PetroChina, at the World Heavy Oil Conference in 2006.

The Bohai Bay field was initially discovered in 1958.

Future Heavy Oil Ventures
Although heavy oil resources in China are plentiful, production has been slow because of the high cost of extraction and processing and a lack of sufficient technology. However, with high oil prices, heavy oil production is now an economic reality.

As technology improves, it may be possible to use the country’s 16-billion tons of exploitable oil shale and 3-billion tons of exploitable oilsand reserves.