Chinese Oil Major Sinopec Announces Oil, Gas Discovery

China’s state-owned oil and gas major Sinopec has struck oil and gas at a field in the northwestern province of Xinjiang, Reuters reports, adding that the reserves at the field are estimated at some 100 million tons.

This would be equal to about 733 million barrels based on a 7.33 barrels-to-the-ton conversion ratio.

The state company said on Chinese social media that it had achieved daily output of more than 6,000 barrels of crude and close to 600,000 cubic meters of natural gas.

The newly discovered field is in a legacy-producing region in the Tarim Basin. It is also the location of the Shunbei field, which produced about 1 million tons of crude oil last year, up by 30 percent from the previous year, and 50 million cubic meters of gas, up 32 percent on the year.

Local production of oil and gas is being prioritized by the Chinese authorities because of the country’s currently overwhelming dependence on imported fossil fuels. Last year, Chinese oil and gas importers had a field day with record-low prices but the rout could not continue forever and domestic production growth is once again high on the priority list. And state majors are delivering.

Earlier this week, another Chinese energy giant, CNPC, announced a new discovery at the Daqing field cluster, which is one of the biggest oil production centers in China. The new reservoir is in a shale formation and contains an estimated 1.27 billion tons of oil.

China has significant oil resource, especially in shale formations. However, their geology is challenging, making the extraction of these resources a lot costlier than in other places such as the U.S. shale patch.

This in turn discourages exploration and production companies from investing in new production because of the lower margins and uncertain results from exploratory work.