Impact of sustained low oil prices on China's oil & gas industry system and coping strategies

Abstract

The global sustained low oil prices have a significant impact on China's oil and gas industry system and the national energy security. This paper aims to find solutions in order to guarantee the smooth development of China's oil and gas industry system and its survival in such a severe environment. First, the origins of sustained low oil prices were analyzed. Then, based on those published data from IEA, government and some other authorities, this study focused on the development status, energy policies and the future developing trend of those main oil & gas producing countries. Investigations show that the low-price running is primarily contributed to the so-called oil and gas policies in the USA. It is predicted that national petroleum consumption will reach up to 6.0 × 108 t (oil) & 3300 × 108 m3 (gas) in 2020 and 6.8 × 108 t (oil) & 5200 × 108 m3 (gas) in 2030. For reducing the dependence on foreign oil and gas, the investment in the upstream of oil and gas industry should be maintained and scientific research should be intensified to ensure the smooth operation of the oil and gas production system. Considering China's national energy security strategy, the following suggestions were proposed herein. First, ensure that in China the yearly oil output reaches 2 × 108 t, while natural gas yield will be expected to be up to 2700 × 108 m3 in 2030, both of which should become the “bottom line” in the long term. Second, focus on the planning of upstream business with insistence on risk exploration investment, scientific and technological innovation and pilot area construction especially for low-permeability tight oil & gas, shale oil & gas reservoir development techniques. Third, encourage the in-depth reform and further growth especially in the three major state-owned oil & gas companies under adverse situations, and create more companies competent to offer overseas technical services by taking the opportunity of the “One Belt and One Road” policy. Finally, promote the new energy business and find solutions to turning those oil companies to integrated energy companies.