Abstract: Fifteen Years of Petroleum Exploration in Offshore China - A Review and Outlook
NIE, SHANGYOU, Petroconsultants, P.O. Box 152, Geneva, Switzerland; WEILIN ZHU, China Offshore Oil Exploration and Development Research Center, CNOOC, Gaobeidian, Hebei, China
Modern petroleum exploration in offshore China started after China National Offshore Oil Corporation (CNOOC) was formed in 1982 with immediate participation by international companies. In merely fifteen years, oil and gas production from offshore China has grown from virtually non-existent to 300,000 bopd and 250,000 mcfd, totalling 110 million barrels of oil and 92 billion cubic feet of gas in 1996, representing some 10% of oil and 14% of gas production for all of China. This success is due to 1) favourable geological conditions especially in the South China Sea and the Bohai Gulf, 2) an open policy of CNOOC from its onset, and 3) continuous participation of international major and independent companies.
From 1982 to 1996, a total of 97 wildcats have been drilled by CNOOC which declared 68 as discovery wells, representing an astonishing 70% wildcat drilling success rate. Of the 185 wildcats drilled in the same period by the foreign operators, 46 are discovery wells, giving a more common 25% success rate in a frontier area. The substantially higher success rate by the state company might be due to a combination of factors, including 1) better prospects, 2) more complete data, 3) more persistent and systematic analysis, and 4) different criteria of commmerciality for a prospect. A closer look of the exploration history indicates that for the 46 foreign-operated discovery wells, 26 (57%) were drilled between 1984-1988, within six years of international exploration in offshore China. The international majors were apparently able to quickly reach a discovery plateau in the frontier area utilizing global experience. This was however followed by a period of less satisfying results, the worst of which came in 1995, when not a single discovery well was drilled among 18 wildcats, mostly in the 4th offshore bid round blocks in western part of the East China Sea. Of the 68 CNOOC discovery wells, 48 (71%) have been drilled from 1993 - 1996, representing a later but larger discovery plateau. The delayed discovery peak can be attributed to 1) increasing level of exploration by CNOOC, driven in part by higher domestic demand, 2) better understanding of geology and hydrocarbon systems, and 3) lessons learned, data and experience gained by the state comply from the international companies, some of which appeared to have either relinquished their blocks pre-maturely or lost staying power due to the need to quickly strike giant fields.
Currently, there are three oil prone basins (east Pearl River Mouth, Bohai Gulf, and Beibu Gulf) and two gas prone basins (Yinggehai - Qiongdongnan and East China Sea) that are either being developed or already in production. More than 65% of offshore oil production comes from the east Pearl River Mouth basin, where fields operated by international majors (i.e., Agip-Chevron-Texaco-CNOOC consortium, Amoco, and Phillips) play a dominant role. In the other two oil producing regions of Bohai Gulf and Beibu Gulf, foreign participation in production is still limited, though the situation may quickly change in the Bohai Gulf, as international companies are encouraged to join the development of at least one >800 million barrel field, the Qinhuangdao 32-6. CNOOC plans to raise production in the Bohai fields to the level of east Pearl River Mouth fields (i.e., ~70 million barrels annually). For natural gas, in the Yinggehai-Qiongdongnan basin, the Arco-operated Yacheng 13-1 field continues to be the largest producer in offshore China. With two submarine pipeline completed and several recent discoveries southwest of the Hainan Island, the level of development and production around Hainan Island is destined to rise in the near future. For the gas prospects in the East China Sea, international companies might find an additional partner in the newly established third Chinese state company, the China National Star Oil Corporation (CNSPC), if the right holding situation of CNSPC in the region is also confirmed by the central government in the near future.
Similar to other basins in the world, after just 15 years, offshore China can still be considered as in the early stage of exploration. Areas such as the western part of the Pearl River Mouth basin (with oil and gas play in the Zhu-III depression), the Yellow Sea basin (especially with the Paleozoic play), and the politically sensitive region of the Spratlys in the southern part of the South China Sea offer opportunities for sizable discoveries. As CNOOC recently set to double its production by year 2000, opportunities are emerging particularly for independent companies and companies that have an expertise in one of the much needed technologies such as developing high pressure gas fields or extracting heavy oil. In addition, two other trends in the activity of CNOOC are worth noting. It is exploring overseas fields as a part of a national long term strategy. It has also recently formed its own downstream subsidiary to operate both domestically and internationally, providing an unprecedented full spectrum of collaboration possibilities in China.