New Bohai gas discovery to ease winter shortages

China National Offshore Oil Corp has made a large-sized natural gas field discovery in the Bohai oilfield, which will likely ease the gas shortage in northern China, the company said on Wednesday.

Discovery well Bozhong 19-6, which includes 10 wells with an average depth exceeding 4,000 meters, will see further evaluation of its gas reservoirs and proceed to the exploitation stage when all tests are completed, it said.

The company said earlier that the evaluation well was tested to produce some 1,000 barrels of oil and 6.4 million cubic feet of natural gas per day, with the gas reservoir seeing a total thickness of 348 meters.

According to Xue Yongan, chief geologist of CNOOC Bohai Oil Administration, the gas discovery will help safeguard China's energy security and reduce the nation's reliance on gas imports.

Over its five decades of exploration, most of the proven reserves in the Bohai Bay Basin, which has seven oilfields including Bohai and Shengli, have been crude oil rather than gas.

"Despite the fact that most of the gas reserves are located 3,500 meters beneath the seabed, which makes it challenging to find gas reserves, technical research and studies in recent years have laid a solid foundation and made exploitation possible," said Xue.

Compared with the oil and gas fields abroad, most of which are located in shallow areas, China has to rely more on deep drilling techniques to access resources as most of the reserves are located in deep-sea areas, he said.

Analysts believe that the gas project will play a significant role in easing the gas shortage of the Beijing-Hebei-Tianjin region of northern China.

According to Na Min, a senior analyst for oil and gas at Bloomberg New Energy Finance, China's top three oil and gas majors are likely to take all possible measures to ensure a relatively stable supply as the nation approaches the winter peak season.

CNOOC, which built China's first LNG terminal in 2006 and operates nine LNG terminals nationwide so far, has been pushing forward with the construction of LNG gas storage facilities while diversifying its overseas LNG sources in recent years to ensure adequate supplies of the clean fuel for the upcoming winter. It recently enlarged the capacity of its LNG terminal in Tianjin with the addition of a new 160,000-cubic-meter-storage capacity LNG tank.

CNOOC Gas and Power Group, a unit of China National Offshore Oil Corp, also signed a long-term purchase and sales contract supplementary agreement with France-based oil and gas giant Total Gas & Power Ltd on Tuesday, aiming to strengthen LNG cooperation, increasing contracted annual LNG purchases from one million tons for 15 years to 1.5 million metric tons annually for 20 years, said the company.

This is against the backdrop of China aiming to increase the share of natural gas in its energy mix in order to clean the environment. National oil majors have been increasing alternative supplies, including pipeline imports and LNG imports from other countries to ensure sufficient gas supply.

China's gas consumption increased 15 percent year-on year during the first six months of 2018, leading to a 50 percent surge in LNG imports, pushing the figure to a historic high of 24 million tons in the first half of this year.

Na said China would be far better equipped to handle the surge in winter demand this year. New and expanded long-term LNG contracts, the additional import capacity of LNG terminals, and increased storage and pipeline connectivity would alleviate the type of pressure which was seen last year.