CNOOC's Kaiping South discovery could lead to more investment in deep-water South China Sea exploration in the coming months.
ADVERTISEMENTChina's third largest national oil and gas company, China National Offshore Oil Company (CNOOC), has recently revealed that it has made a massive deep-water oil discovery in the Kaiping South oilfield. This will add more than a hundred million tons of oil equivalent to the oilfield's total proved in-place volume.
The Kaiping South oilfield is 300 kilometres off the coast of Guangdong province, in the South China Sea. It is one of China's offshore oil fields, mainly yielding light crude oil. With an average water depth of about 500 metres, the key oil-bearing plays are Enping Formation, Zhuhai Formation and Wenchang Formation of Paleogene.
China's other major oilfields include the Bohai oilfield and the Daqing oilfield, amongst others.
CNOOC's deputy chief exploration officer Xu Changgui said in a press release: "Kaiping South Oilfield is China's first deep-water and deep-play oilfield with proved in-place volume over a hundred million tons.
"The discovery fully demonstrates the broad prospects for exploration in deep-water South China Sea and further expands the resource base for the company's high-quality development."
Company president and CEO Zhou Xinhuai, said in the same press release: "In recent years, CNOOC Limited has achieved remarkable breakthroughs in oil and gas exploration in the eastern South China Sea, building a new growth pole for offshore oil and gas production.
"The company remains committed to oil and gas resources exploration and development in the South China Sea, thereby continuously enhancing its energy supply capacity."
What does this mean for China's oil sector?
China's oil production has grown rapidly over the past few years, mainly due to increasing government and private spending. However, this could be slowing down, especially post-pandemic, as government stimulus mostly goes towards propping up the economy and supporting other struggling sectors such as infrastructure.
Lin Chen, analyst at Rystad Energy, as reported by OilPrice.com said: "The majority of China's oil fields are in a mature phase, facing natural production declines while the scarcity of substantial new discoveries poses a challenge to sustaining long-term production growth at current rates."
According to Statista, China was the second largest importer of crude oil in 2022, following Europe, at about 12.2 million barrels a day. This was likely to be due to its increasingly booming manufacturing sector and overall industrialisation, requiring much more energy in the last few years.
In earlier years, most Chinese oil producers did not want to spend vast amounts of money on exploration which were not always likely to yield satisfactory results. However, this new discovery could also encourage China to import less foreign crude oil and focus anew on its domestic production, with solid proof of existing oil resources.
CNOOC has also increased its production targets for 2024, now looking at producing an output of anywhere between 700 million and 720 million barrels this year. If so, this would be a considerable step up from 2023's oil equivalent output of 675 million barrels.
