Abstract
At a major industry conference in March in Beijing, Wang Yilin, the chairman of China National Petroleum Corporation (CNPC), took a moment to highlight that just outside the doors to the building were blue skies—a result, he said, of the country’s move to displace coal-fired power generation with cleaner-burning natural gas. Wang praised his company’s “enormous contribution” to the pleasant conditions by emphasizing CNPC’s role as China’s largest producer of natural gas. In doing so, he underlined how the company, the fourth largest in the world, is being reshaped by China’s multifaceted energy transformation. The country depends on coal for more than half of its energy needs, while natural gas represents only 7% of the mix, an increasing amount of which is imported as liquefied natural gas (LNG). Driven by air quality concerns, the country is looking to double that gas figure by 2035. But its national energy security agenda includes reducing dependence on foreign LNG by relying on national oil companies to increase domestic supplies through the commercialization of unconventional resources. But what is less clear than the skies above the conference is how China’s oil and gas industry will realize this ambition. So far, the unconventional programs have struggled to mature as rapidly as the state had hoped. In his remarks, made during a keynote address at the International Petroleum Technology Conference (IPTC), Wang emphasized what he views as the chief culprit behind the difficulties: China’s complex unconventional geology, which is unlike anything most US shale explorers have ever had to overcome. “So it’s not that easy to simply replicate the shale gas technology developments of North America,” he argued. Wang later stressed that his country’s unconventional sector is “urgently in need of technology breakthroughs,” ones tailored to its own geologic fabric. The technical portion of IPTC offered new case studies that shed light on the increasing role that innovation and technology are playing in overcoming the nature of these unconventional formations. Engineers presenting their research made it clear that without the right tools, they must work through an unpredictable drilling and completions environment, driving up both costs and nonproductive time. Of more than 500 technical papers presented at IPTC, just over 50 focused on different aspects of China’s domestic programs that are spread across the country. Several were authored by engineers and researchers working at PetroChina. The company sits under CNPC as a wholly-owned subsidiary where it serves as the main arm of its exploration and production business and holds the largest mineral rights for unconventional resources in the country.
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