China sets up new state body to drill deep for oil and gas reserves

China is launching a new initiative aimed at unlocking ultra-deep oil and gas reserves and enhancing its capabilities in extracting non-conventional resources, the state-owned energy conglomerate CNPC announced on Monday. This move is aligned with President Xi Jinping’s directive to bolster the sector’s “new productive forces” in support of national energy security, as detailed on CNPC’s official website.

The initiative brings together key national oil producers like CNPC and Sinopec, along with seven other state entities including China Aerospace Science and Industry Corp, Baowu Steel Group, Sinomach, Dongfang Electric Group, and Minmetals. The collaborative effort aims to pool expertise and resources to establish a comprehensive industry chain encompassing ultra-deep oil and gas exploration, development, and engineering, CNPC highlighted.

Focused initially on drilling conventional resources from ultra-deep wells, potentially extending up to 10,000 meters (6.21 miles) below the surface, the initiative will concentrate on regions such as the Tarim basin in northwest Xinjiang. This area is pivotal for CNPC and Sinopec, both major players in China’s oil and gas sector. Additionally, the initiative seeks to tap into deep shale oil and coal-seam gas resources.

China, the world’s largest importer of crude oil, relies heavily on imports to meet nearly three-quarters of its energy demands. To mitigate this dependency, China has been investing substantially to maintain domestic crude oil production above 4 million barrels per day, essential for sustaining manufacturing and military activities.

Despite efforts by state oil majors to drill deeper onshore and accelerate offshore oilfield development, production growth has averaged only 2% annually since 2018. Challenges persist, including declining output from mature fields and the complex geological and economic landscape of shale oil and gas extraction.

The new initiative underscores China’s strategic commitment to enhancing its energy security through technological advancements and collaborative efforts across its state-owned enterprises, aiming to secure long-term sustainable energy solutions for the nation’s growing needs.