China's Oil Production: Achievements and Future Challenges

In 2022, China achieved a record oil production of 4.32 million barrels per day (bpd), marking the culmination of a seven-year initiative to enhance domestic output through aggressive drilling in aging fields, offshore expansion, and initial shale oil production. However, experts indicate that China is nearing the economic limits of its production capabilities. Analysts predict that output will plateau just below this record level for the next decade, as offshore growth begins to decline and the exploitation of higher-cost unconventional resources becomes increasingly challenging. The Chinese government’s 2026-2030 plan aims to maintain production at around 4 million bpd, underscoring the nation's continued reliance on oil imports, which totaled 11.55 million bpd last year.

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China's oil production strategy has heavily relied on advanced recovery techniques, particularly in its flagship Daqing oil field, which produces approximately 600,000 bpd. The use of "tertiary recovery" methods, such as injecting chemicals and gases, has significantly enhanced output. Cheng Jiecheng, a chief expert at Daqing, stated that these technologies could potentially unlock an additional 7.3 billion barrels from older fields. Over the past two decades, tertiary recovery has contributed around 161 million barrels annually, accounting for about 10% of national output. The China National Petroleum Corporation (CNPC) has successfully applied these methods on a large scale, leading to contracts in countries like Saudi Arabia and Iraq.

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Despite recent advancements, China's shale oil production remains limited. In 2022, the country produced nearly 164,000 bpd of shale oil, a 30% increase from the previous year. However, the commercial viability of shale oil is hindered by low single-well output and high production costs, which range from $45 to $90 per barrel. Projects in regions like the Ordos Basin and the Daqing area have shown promise, with costs potentially decreasing due to improved drilling techniques. Nevertheless, the overall outlook for shale oil production is cautious, with forecasts suggesting it could reach 120 million barrels annually by 2035, representing only 8% of China's total output.

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Looking ahead, energy research firms predict that China's oil output will remain relatively flat through 2026, with gradual declines expected thereafter. Rystad Energy anticipates that production growth will peak between 2028 and 2030 at approximately 4.36 million bpd. In response to these challenges, China is actively increasing its strategic oil stockpiling to mitigate supply risks. Matthew Andre from S&P Global Energy noted that a production peak would highlight the limits of policy-driven supply growth, reinforcing China's long-term dependence on global oil markets amid slowing demand growth.

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The Chinese government has emphasized the importance of maintaining a stable domestic oil supply to support national security and economic needs. Analysts and industry experts have echoed this sentiment, highlighting the necessity of balancing domestic production with import reliance to navigate potential supply disruptions.

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Some critics argue that China's heavy reliance on imports, despite its production capabilities, exposes the country to vulnerabilities in global oil markets. They express concern that the plateauing of domestic output could hinder China's energy security in the long term.

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• "The three national oil companies are trying to maintain that level as long as they can, which is seen as a minimum amount to cope with unpredictable supply disruptions." — Zhu Weilin, Professor at Tongji University

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• "A production peak would also signal the limits of policy-driven supply growth and reinforce China's long-term reliance on global oil markets, even as demand growth slows." — Matthew Andre, Associate Research Director at S&P Global Energy

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