The evolving centres of gravity in China's oil and gas industry: Evidence from infrared radiation imaging gas flaring data

Abstract

Traditional macro data distort information on oil and gas exploitation and processing capacities and cannot track the movement of gas combustion. This study proposes a new way to retrieve those capacities and to explore changes in the trajectory of China's oil and gas exploitation and processing centres via gas flaring based on a combination of kernel clustering-kernel principal component analysis (KPCA) and spatial methods. We use data from the Visible Infrared Imaging Radiometer Suite (VIIRS) between 2012 and 2016. Results show that the upstream centre of gravity of oil and gas exploitation and processing in China moved to the southwest and the downstream centre of gravity moved to the southeast. Results of Kernel clustering-KPCA show that production, processing and transportation of oil and gas production moved from inland areas to coastal ports. Results from spatial analysis show existence of the influence of inter-regional externalities on the development of oil and gas exploitation and processing. The new economic geography theory provides a theoretical framework to explain the spatial evolution of oil and gas exploration and processing. Empirical findings of the changing path of the oil and gas exploitation and processing centres of gravity and the kernel clustering-KPCA analysis provide a scientific basis for tracking the effectiveness of government environmental policy and for policymaking on mitigation of combustion gases. This novel application extends the utilisation of the VIIRS and can be applied globally for tracking dynamic changes in the centre of gravity of oil and gas exploration and processing.