CNPC to spend $22b in Xinjiang

Funds to push oil, gas output in region to 50m tons

China National Petroleum Corp (CNPC) plans to spend more than 150 billion yuan ($22 billion) by 2020 to boost oil and gas production in Northwest China’s Xinjiang Uyghur Autonomous Region, aiming to offset falling output from ageing fields in northeast China.

The increased spending will push output in Xinjiang to more than 50 million tons of oil equivalent between 2018 and 2020, CNPC said.

The investment is equivalent to the total expenditure by CNPC’s listed unit PetroChina, China’s top oil and gas producer, for oil and gas exploration and production in 2017.

CNPC’s Xinjiang operations churned out 11.45 million tons of crude oil last year, while the company produced 23.5 billion cubic meters of gas, equivalent to 17.1 million tons of gas, from the Tarim Basin in the region, one of China’s largest gas basins, according to PetroChina’s 2017 annual report.

Based on these figures, the new investment should boost output from the region by at least 75 percent by 2020.

The spending spree underscores the need to replace output from the Daqing Oilfield in Northeast China’s Heilongjiang Province as well as a push to increase the country’s natural gas output to meet growing demand for the fuel as part of the country’s shift away from coal.

“I think that the primary factor is to support the central government policy to invest more and support economic development in the west,” said Liutong Zhang, director at Hong Kong-based WaterRock Energy Economics.

“A portion of the money would be spent on the logistics, storage tanks and also downstream gas infrastructure for the southern part of Xinjiang to use natural gas for environmental reasons.”

The boost is unlikely to affect import demand from the world’s top crude importer because new output will replace lost capacity elsewhere.