CHINA SWITCHES E&D FOCUS TO NATURAL GAS

China is shifting its exploration and development emphasis to natural gas in light of lagging oil production.

Another factor in the shift has been the accelerated pace of significant gas discoveries in the country. Latest world class discovery was a gas field in the Shaanxi-Gansu-Ningxia area, with potential reserves estimated at 3.5 tcf. It is China's biggest onshore gas discovery (see map, OGJ, July 29, 1991, p. 25).

For now, China's explorationists are focusing on the Qaidam basin in Qinghai province of Northwest China, where gas reserves discovered in 1991 alone total about 350 bcf, China Features' Xu Yihe reported.

GAS PUSH MOTIVE

Aside from developing critically needed sources of energy supplies in remote, poor areas such as Qaidam and Shaan-Gan-Ning, the push to find and produce more gas in China is designed to back out crude oil as a petrochemical feedstock and thus help sustain oil exports for sorely needed foreign exchange.

China National Petroleum Corp. (CNPC) said China's 1991 crude production, when all figures are in, will show a drop to 2.74 million b/d, down about 20,000 b/d from 1990's level, Xu wrote. CNPC cites flat or declining production in some of eastern China's mainstay fields.

Currently, natural gas accounts for only 3% of China's energy mix, said CNPC General Manager Wang Tao. Chinese investment in the gas sector recently has averaged only about 2 billion yuan ($377 million)/year, 1/10th of spending for the oil sector. However, CNPC plans to spend 3 billion yuan ($565 million) for gas exploration and development in 1992.

China's gas potential is huge. Official estimates put the ultimate resource at about 1.4 quadrillion cu ft, Xu wrote. Chinese explorationists to date have confirmed potential reserves of more than 35 bcf each in eight fields or basins (see table).

However, CNPC estimates China's gas production at only 1.4 bcfd in 1991, flat with 1990. Almost half that comes from the Sichuan basin, expected to produce about 671 MMcfd in 1991.

CNPC meantime is pressing development of giant gas fields in China. The Shaan-Gan-Ning strike came when explorationists were looking for oil in the remote area, one of China's poorest regions. To date, 33 commercial wells have been drilled there, with 15 of them producing 3.5 MMcfd or more and two of those 35 MMcfd each.

CNPC has earmarked 1.2 billion yuan ($226 million) for gas development and continued exploration in the area the next 5 years, Xu reported.

QAIDAM POTENTIAL

Qaidam, noted for an inhospitable climate, is poised to become a major gas producing area.

Latest estimates place the basin's proved reserves at 1.785 tcf, trailing only Shaan-Gan-Ning and Sichuan, Xu wrote.

On the Tibet-Qinghai plateau at elevations of 8,500-10,000 ft, the Qaidam basin lies just east across a mountain range from the highly prospective Tarim basin. Five recently completed wells flowed about 3.5 MMcfd each.

The basin's total resource potential is estimated at 3.6-8 tcf, focusing mainly on a 17,600 sq km gas prone area.

Gu Shusong, senior petroleum geologist with the regional Qinghai Oil Administration, predicted proved reserves will climb to as much as 2.45 tcf during the next 5 years, Xu wrote.

Production is expected to climb to about 96 MMcfd by 1995 from about 72 MMcfd at present, Gu said, noting that production level could be maintained for 20 years in the portion of the basin being developed.

Toward that end, CNPC has earmarked 2.5 billion yuan ($471 million for accelerated gas development and exploration in the Qaidam basin the next 5 years.

A level of about 100 MMcfd will provide feedstock for a petrochemical complex at Golmud, an industrial city emerging on the southern edge of the Qaidam basin. The complex would use the methane rich gas to produce methanol, urea, and other petrochemicals. The plant is scheduled for completion in 1994 at a cost of 240 million yuan ($45 million). Gas will move to the plant through a 200 km pipeline, also to be complete in 1994.

QAIDAM OIL

The Qaidam basin also produces oil. Although oil was discovered there as early as 1955, a harsh climate and lack of infrastructure have reined E&D efforts, Xu wrote.

The basin's 16 oil fields, in the western portion of the basin, produced about 16,000 b/d in 1990. That's expected to rise to 24,000 b/d when final figures are in for 1991.

Oil resource in the Qaidam basin is estimated at 14 billion bbl.

Qaidam oil is transported about 1,000 km east to a refinery at Lanzhou, capital of Gansu province. Refined products are then shipped back to Golmud for transshipment to Lhasa, Tibet's capital.

To cut transportation costs and help boost the local economy, Beijing is building a refinery at Golmud. The 20,000 b/d plant is to be complete in 1994. Its products will be sold locally and in Tibet. Crude will move to the refinery through a recently completed 436 km pipeline.