New Discoveries Needed for China's Soaring Energy Demand

China's surging economy and growing population mean the country's demand for oil is expected to increase by 200% during the next 20 years.

"Since 2003, China has been the second largest oil consumer in the world, second only to the US," said Dacun Li of the Petroleum Institute in Abu Dhabi. Li discussed the past and present energy picture for the world's largest country during a presentation on the last day of the 2004 Society of Petroleum Engineers (SPE) Annual Technical Conference and Exhibition.

With the 1960s discovery of the Daqing oil field, China became energy self-sufficient. From 1978 to 1985, China was exporting 80% of its domestic crude production. In 1985, China was East Asia's top oil exporter.

But, by 2002, following a decade of GDP growth that averaged more than 9% a year, China became the world's second largest oil importer after Japan. Now, about 40% or more than 2 million barrels a day of the 5.6 million b/d consumption has to be imported.

Li expects China's domestic production "will be almost constant during the next two decades, about 3.4-3.5 million b/d unless a new significant field is found." The Daqing field, whose cumulative output has been more than 11 billion barrels in the past 40+ years, "is facing imminent exhaustion of exploitable reserves," Li said. "The focus of Daqing may be converted from exploration and production to the petrochemical industry in the future."

He explained the percentage of China's oil imports will continue to increase. By 2015, Li expects the country to be importing 66% of its oil and, by 2025, with consumption reaching nearly 17 million b/d, a 200 percent increase from 1993, 80% of its oil will have to be imported.

At that level of consumption, China will be the world's number two oil consumer, nearly the equivalent of current US oil demand at slightly more than 20 million b/d.

Interestingly, Li pointed out that the China demand forecast he calculated for his SPE presentation is higher than the US Energy Information Administration (EIA) and "even higher than the prediction made by EIA under the assumption of a high economic growth scenario."

So, what steps are the Chinese government taking to prepare for this robust energy future over the next two decades?

Right now, Li said, the Kazakhstan-China pipeline that will bring crude to Xinjiang is under construction plus the $24 billion, 2,500-mile West-East pipeline, expected to be finished next summer, will transport 12 billion cubic meters of gas across the country. Even so, that will not meet gas demand, which Li said will increase 500% up to the year 2025. By then China's population is expected to grow to about 1.5 billion from the current 1.3 billion.