China’s CNOOC this week started production from the first deepwater gas field it operates fully, Reuters has reported, adding that the field is expected to yield some 4.39 billion cubic meters of natural gas, representing 2 percent of China’s total output.

The Chenhai-1 well was drilled at the Lingshui 17-2 field in the South China Sea and, according to CNOOC, could push its total natural gas production capacity to more than 13 billion cubic meters annually.

The launch of production from the Chenhai-1 well is part of CNOOC’s plan to boost offshore drilling considerably in a bid to increase the share of natural gas in its total output from 21 percent right now to half by 2035.

The plan is part of Beijing’s stated goal to become a net-zero economy by 2060, which, according to a Reuters report, has to include a transition from coal to natural gas first before moving on to renewables.

This embracing of gas as a bridge between coal and renewables is driving a surge in demand for the commodity. Already one of the world’s largest gas importers, China is on its way to this year dethrone Japan as the largest LNG importer. And this dependence on imports does not sit well with decision-makers in Beijing, especially as this year total gas demand is seen rising by 10 percent to 350-356 billion cubic meters.

Meanwhile, local production is growing but not fast enough. Even so, it added 15 percent during the second half of 2020, according to Fitch Ratings, which also said it expected the trend of strong production growth to continue over the next five years.

China has abundant oil and gas reserves but tapping them is often challenging due to geological reasons, which has so far prevented the country from shrinking its overwhelming dependence on imported oil and gas. Despite this, CNPC earlier this month announced a major discovery in the Tarim Basin, saying reserves were estimated at some 16 billion tons.

Story continues

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:

  • Reuters: U.S. Agrees To Lift Iran Oil Sanctions

  • Can The Middle East Survive Without Oil?

  • Solar Has An Unlikely New Enemy

Read this article on OilPrice.com

(305) 707 0888