China can maintain a healthy oil supply with new discoveries in its sea and land-locked western regions, despite growing exploration difficulties, experts claim.

Zhai Guangming, an academician of the Chinese Academy of Engineering, said China's annual oil output could reach 185 million to 195 million tons.

Speaking at this weekend's forum on the nation's energy strategy, he said:"China is able to maintain such an output for some 10 to 15 years."

China produced 182 million tons of crude oil in 2005 with its dependency on overseas oil and oil products reaching 42.9 per cent.

 But according to Zhai, China can expect to see a stable growth of its proved oil reserves for at least 10 years.

Zhu Jianjun, research division director of the China National Petroleum Corporation (CNPC), China's largest oil producer, said that there is potential for more oil to be discovered, despite the increasing difficulty in oil exploration.

By fully developing old oil fields in the east and increasing drilling in the west and offshore areas, China's annual crude oil output could surpass 200 million tons by 2020 and remain at 170 million tons by 2030, said Zhu.

The National Development and Reform Commission has predicated that China will consume 330-350 million tons of oil by 2010.

"We should step up efforts to produce as much as possible while strengthening energy-saving measures," said Zhu.

He said major oil fields in East China have entered the output reduction phase and new fields in the west and offshore are becoming the country's major suppliers.

Many potential resources are spread across geologically-complicated regions such as deserts, loess plateaus and offshore in deep water, and will need more advanced oil exploration technology to extract, he said.

Zhu warned that China's oil supply is facing risks, which need to be solved through increased domestic production.

"The risk isn't a shortage, but uneven distribution, which is causing instability in the world oil market," he said, adding that soaring oil prices will be the first hurdle China faces.

Statistics indicate that China spent US$43 billion importing oil in 2004, rising to over US$50 billion in 2005.

Zhu predicted that China's spending on oil imports will keep rising as its imports increase and the international oil price remains sky high.

Transport also poses a problem for China's oil supply, he said.

Currently, more than 70 per cent of China's oil imports pass through the Malacca Straits in Southeast Asia.

"As the channel is now near to capacity, other channels have to be found," said Zhu.
To counter the risks, China must increase its domestic oil and natural gas supply as well as developing overseas sources to ensure diversified supply and transportation channels, he said.

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