China is regarded as a reliable customer for oil because of soaring local demand, but in recent years, it has also emerged as a global operator and provider of services.
Although the country is one of the world’s largest energy consumers as a whole, it is considered a small consumer per capita and coal remains the main source of energy. In 2012, coal accounted for 70% of China’s energy use. At a panel session during OTC, Yan Cunzhang, president of China National Petroleum Corporation’s (CNPC) foreign development department, said that energy consumption per capita in China will continue to rise. National companies such as CNPC will continue to play a leading role in China’s petroleum industry, even as the country moves away from subsidizing energy-related products, he said. “China is transforming its oil and gas pricing from government-dominant to market-dominant,” Yan said.
China has considerable conventional and unconventional resources, but it will not fully develop its unconventionals any time soon, he said. “We need to be more patient and more skilled to be able to develop our shale gas,” Yan said.
In another presentation, Zhang Yong Jie, president of Sinopec Oil Field Services, highlighted China’s offshore development potential. “Chinese offshore companies are capable of providing solutions for oilfield development, compared with 30 years ago, when we relied mainly on foreign contractors,” he said.
Chinese fabrication yards are now able to supply the full range of fabrication requirements of global energy companies. Zhang said that 15% of the world’s floatover installation projects are based in the South China Sea.
The deepwater market in the South China Sea will continue to be a growth area, he said, as large investments are expected through 2015 in platforms, wells, subsea pipelines, FPSOs, onshore terminals, and offshore windmills.
Vietnam Aiming to Expand Production
Petrovietnam, the state-owned oil and gas company of Vietnam, is seeking international partners to help produce more oil and gas, company executives announced at OTC.
Do Van Hau, president and CEO of Petrovietnam, told attendees at a topical breakfast that his country’s oil and gas demand is rising 15% annually and that the company plans to aggressively increase production through international investment by opening up its deepwater fields to foreign oil companies that can drill in challenging environments.
Petrovietnam wants to increase oil production from 110,000 BOPD to 180,000 BOPD by 2015 and to 470,000 BOPD by 2025. Vietnam, a net exporter of crude oil, has a total production of 320,000 BOPD through Petrovietnam and other producing companies operating in the country.
Nearly 90% of domestic production is in the southern offshore fields located on the continental shelf, leaving deepwater fields relatively untouched and open for exploration by foreign partners, Hau said.
Petrovietnam also produces nearly 1 Bcf/D of natural gas and plans to increase output to 1.5 Bcf/D in the next 4 to 5 years.
With the abundance of natural gas found offshore, Petrovietnam has become the country’s second largest generator of electricity, supplying roughly a third of total demand using a combination of gas-powered plants, hydropower plants, and coal-fired plants. Petrovietnam plans to maintain its role as an electricity provider with five new gas plants that are in various stages of construction. The company is seeking companies outside the country to help reduce carbon dioxide emissions.
Petrovietnam’s international portfolio consists of 20 projects spanning 17 countries, whose total continued production is 26,000 BOPD. The company hopes to increase the rate to 60,000 BOPD as it brings online wells in Peru, Algeria, and Russia in late 2013 through 2015. Petrovietnam also has rights to undeveloped fields in Uzbekistan and Myanmar.
While the company owns rights to exploratory blocks offshore Cuba, Petrovietnam officials said there are no plans to begin drilling operations there.
Petrovietnam owns five drilling rigs: three jackups, a semisubmersible, and a land rig in Algeria. The company said it is interested in acquiring more jackup rigs to expand shallow-water exploration operations.
Indonesia: Changing the Game
Indonesia is changing its hydrocarbon development strategy, focusing more on developing its gas fields to maintain economic growth and meet soaring local consumption.
H. Hardiono, executive expert to the chairman of the Special Task Force for Upstream Oil and Gas Business Activities (SKK Migas), a governmental agency that manages upstream business activities under cooperation contracts, said that Indonesia is trying to shift from oil to natural gas resource exploration and development and will also shift most of its E&P activity from the western part of the country to the east.
The country is also turning more of its gas production from export to the domestic market, said Hardiono, who spoke at a topical breakfast during OTC.
Indonesia currently holds 19% of the total Asia Pacific gas reserves and 1.3% of the world’s gas reserves. The country produced 974,000 B/D of oil in 2012 and its gas production was 2.69 Bcf with exports at about 1.37 Bcf. “Our economic operating environment has changed, so we changed our production dynamic to support the growth,” Hardiono said.
The country, which pulled out of OPEC in 2008, is working hard to regain its status as the biggest oil producer in southeast Asia. The country has 18 major oil and gas projects under development, of which 15 are gas development projects.
In his presentation, Hardiono featured some of the major ongoing gas development projects, including the Donggi Senoro Project, which consists of two fields: the Matindok field which holds gas reserves of 1 Tcf, and is fully operated by Pertamina EP; and the Senoro field, with gas reserves of 2.1 Tcf and operated jointly by Pertamina (50%) and Medco (50%). “The ongoing exploration and development activities are set to increase the reserves. We expect the project to be up and running by Q4 2014,” he said.
Hardiono also featured the Abadi gas field project, which is located in the Masela Block in the Arafura Sea. Operated by Inpex Masela, the project is expected to be operational by 2016 and will feature a floating LNG unit. Meanwhile, Eni’s Jangkrik Project in the Makassar Strait, which has a gas reserve of 921 Bcf, is set to be operational by 2015.
Speaking about offshore challenges in Indonesia, Hardiono highlighted several issues related to the scarcity of seismic survey vessel and deepwater drilling rigs, in addition to uncertainties in development concept selection, design, and technological approaches.
Indonesia’s plan will be based on expanding exploration activities in deepwater and frontier areas, and improved regulations and incentives to attract more deepwater investments. “Streamlined process, regulatory approvals, and issue resolution are also part of the streamlined plan,” he said.