China Oil and Gas Upstream Market - Growth, Trends, COVID-19 Impact, and Forecasts (2022 - 2027)

The Chinese oil and gas upstream market is expected to register a CAGR of more than 3% during the forecast period, 2022-2027. The COVID-19 outbreak in Q1 of 2020 had an adverse impact in terms of drawdown investments, reduced oil and gas exploration, and production activities across the country. Factors such as the discovery of new oil and gas fields, rising oil and gas investments, and the growing demand for petroleum products with the rising population are expected to drive the oil and gas market during the forecast period. However, rising emphasis on the renewable energy sector along with higher oil and gas production costs are expected to hinder the market growth during the forecast period.

Key Highlights

• The offshore segment is expected to dominate the China oil and gas upstream market, owing to increasing oil and gas exploration activities to meet the demand.
• China targets to boost domestic production of unconventional sources like shale gas. It is also estimated that China's shale gas production is likely to reach around 280 billion cubic meters (bcm) by 2035. This factor is expected to create immense opportunities for China's oil and gas upstream market in the coming years.
• Rising oil and gas investments in exploration and production activities are expected to drive the nation's oil and gas upstream market during the forecast period.

Key Market Trends

Offshore Segment to Dominate the Market

• China is majorly focused on offshore exploitation, exploration, and development of crude oil and natural gas fields to meet the demand. The offshore segment is the largest producer of crude oil and natural gas in China.
• China has developed new offshore exploration techniques such as the floating assemble technique with low cost and high efficiency, putting China in a leading position in erecting offshore oil platforms in the world. This is expected to increase the demand for offshore oil and gas fields.
• In May 2021, China National Offshore Oil Corporation (CNOOC) completed the deployment of a 15,000-ton offshore oil platform in the South China Sea. The platform will be used in mining oilfields of Lufeng 14-4 and 14-8, which will be included in the Lufeng oilfield group and offers oil and gas supplies for the Guangdong-Hong Kong-Macao Greater Bay Area.
• In June 2021, CNOOC's deepwater gas field commenced production capacity of 10 million cubic meters a day. The gas field, also named Lingshui 17-2, sits 1,500 meters below the sea surface in the South China Sea. The field will be able to supply 3 billion cubic meters of gas a year, or roughly 1% of China's gas demand.
• In September 2021, CNOOC Limited announced the discovery of Kenli 10-2 oilfield in Bohai Bay. The Kenli 10-2 oilfield is located in Laizhou Bay Sag in Southern Bohai Bay, with an average water depth of about 50 feet.
• Therefore, owing to the above-mentioned points, activities in the offshore sector are likely to increase and have a positive impact on the China oil and gas upstream market over the forecast period.

Rising Oil and Gas Investments Driving the Market Demand

• China is the world's second-largest consumer of oil and gas and the sixth-largest producer of oil and gas globally. The China oil and gas upstream market is dominated by state-owned oil and gas companies by developing the country's domestic oil and gas exploration and production activities.
• China's natural gas production has seen significant growth with rising demand from numerous industries. Natural gas production increased to 192.5 billion cubic meters in 2020, from 176.1 billion cubic meters in 2019. This is expected to attract major investments to meet the demand.
• In order to meet the county's oil and gas demand and boost domestic energy supplies, in 2020, China's Ministry of Natural Resources announced the opening of foreign direct investments in the oil and gas industry. It aims to allow foreign companies to explore for and produce oil and gas in the country.
• In February 2021, CNOOC announced total capital expenditure in the range of USD 13.91 billion to USD 15.46 billion, with targeted net production of 545-555 million barrels of oil equivalent (Mboe).
• In March 2021, Sinopec announced to invest CNY 66.8 billion in upstream exploration, focusing on shale gas development in southwest China and the construction of liquefied natural gas (LNG) terminals in coastal areas.
• In November 2021, ExxonMobil announced the final investment decision (FID) to build a multi-billion dollar petrochemical complex in south China's Guangdong province. The Dayawan plant will produce performance polymers used in packaging, automotive, agricultural, and consumer products for hygiene and personal care.
• Hence, increasing investments from domestic and foreign firms are expected to drive the Chinese oil and gas upstream market during the forecast period.

Competitive Landscape

The Chinese oil and gas upstream market is moderately consolidated. The key players in the market include China National Petroleum Corporation, China Petroleum & Chemical Corporation (Sinopec), China National Offshore Oil Corporation (CNOOC), Exxon Mobil Corporation, and Chevron Corporation.

Additional Benefits:

• The market estimate (ME) sheet in Excel format
• 3 months of analyst support

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