OTC Asia Sessions Discuss Region’s Role in Price Downturn, Recovery

Abstract

As the oil and gas industry weathers a transitional phase brought on by a drop in oil prices, burgeoning markets in Southeast Asia stand poised to establish themselves as legitimate players in the future. Attendees of the recent Offshore Technology Conference Asia in Kuala Lumpur saw the myriad ways in which the region’s potential could make it into an industry stronghold. In a series of sessions devoted to individual countries in the Asia Pacific region, representatives from national oil companies, multinational operators, and service companies presented their thoughts on the roles they will play in the overall development of the region and the global oil market. China Panel speakers at the China country session described a country flush with natural resources but unable to exploit them to the fullest extent. Led by its national oil company, the China National Petroleum Corporation (CNPC), the country is eager to acquire the tools needed to increase production from its oil and gas reserves. While the Chinese market is still in a nascent developmental stage, Zhang Xiaofeng said the CNPC is optimistic about its progress in developing specific types of reservoirs. Zhang, a project manager at CNPC, cited volcanic reservoirs as a particular source of optimism. China has one of the largest collections of proven volcanic reserves in the world; 900 billion m3 of the country’s 3 trillion m3 (Tcm) total proven reserves is in volcanic reservoirs. However, Zhang said there are some technical difficulties CNPC faces in actualizing these resources. He said the company must improve its reservoir prediction techniques, as well as its crack detection. Zhang was equally optimistic about shale gas prospects in China, but operational costs must continue to decline in order for the country to increase development of the resource. CNPC estimated that in 2015, the cost of drilling a horizontal well in shale formations in the Sichuan Basin ranged between USD 11.3 million and USD 12.9 million per well, representing a 23% cost reduction from 2013. “Of course, shale gas is an important resource for China,” Zhang said. “It is a rich gas area, and hopefully some of our successful projects will push shale.” China’s focus on shale gas has been driven in large part by its inability to develop its coalbed methane (CBM) resources. The country’s total resource of CBM is approximately 36.8 Tcm, but the coal depositional structure in China is too complex for the existing technological infrastructure to exploit. Overcoming this complexity will be critical for the country in the near future. Zhang said there is, at present, no large-scale commercial production of CBM in China. Xiangyu Wang, a professor of construction management at Curtin University and the moderator of the session, said renewables should play a larger role in China’s energy policy, even as the country continues to develop its oil and gas economy. Coal made up 65.7% of China’s total energy consumption in 2013, compared with 18.9% for oil and 5.5% for gas.