National Policy Reaffirmed: Greater Exploration and Development Efforts — The Petroleum Industry Enters a Phase of High-Quality Development

The National Energy Administration recently held the 2021 work meeting in Beijing on vigorously increasing oil and gas exploration and development,mobilizing domestic oil and gas producers such as PetroChina, Sinopec, CNOOC and Shaanxi Yanchang Petroleum to continuously improve oil and gas exploration and developmentinvestment.

Beyond the policy endorsement, steadily rising international oil prices since the start of the year are also creating a favorable environment for the oil and gas industry.

2021 Brent Crude Oil Price Trend

At the time of writing, WTI crude stood at USD 70.26 per barrel and Brent at USD 72.3 per barrel,Both price levels remain at their highest in more than two years.

With top-level policy support and international oil prices providing a floor, China's oil and gas industry now enjoys double assurance for its development.

Double Assurance for the Industry: Rising Oil Prices and State Support

Many institutions at home and abroad are currently optimistic about the oil market outlook. Some analysts believeInternational oil prices are expected to trend upward with volatility in the second half of the year.

the International Energy Agency expects oil demand to rebound strongly in the second half of 2021 and the global oil market may still see1.5 Million Barrels per Day shortages, so international oil prices should continue to be supported. OPEC also believes that, driven by the gradual recovery of consumption across industries and continued vaccination, oil demand will pick up markedly.

UBS forecast in July that Brent would reach USD 80 per barrel by the end of September this year; Citigroup was more aggressive, predicting that Brent crude futures would rise toUSD 85 or higher this year. Judging by industry experience, such a price per barrel would give the oil industry strong support.

Compared with the international market, China's oil and gas industry enjoys an additional layer of assurance.

Since the seven-year action plan was implemented in 2019, intensifying exploration and development has become the strategic positioning of domestic oil producers and a major concern at the national level.

On July 15 the National Energy Administration held another work meeting on vigorously increasing oil and gas exploration and development, at which it stressed the need to press ahead with the implementation plan for reserve growth and output increases,Increase Funding and Workload for Exploration and Development; to make every effort to break through a series of key technologies in oil and gas exploration and development and strive to discover new large and medium-sized oil and gas fields.

At the same time, the meeting requiredTaking Offshore and Shale Oil and Gas as the Frontline for Reserve Growth and Production Increase; for the major oil and gas fields, the withdrawal and transfer of oil and gas mining rights will be accelerated so as to bring undeveloped reserves into production.

It is worth noting that the conference on intensifying oil and gas exploration and development received an enthusiastic response.

During the meeting, energy authorities from four provincial-level regions — Tianjin, Henan, Guangdong and Gansu — spoke as representatives about their past coordinated support for increasing oil and gas reserves and output, while domestic oil and gas producers including PetroChina, Sinopec, CNOOC and Shaanxi Yanchang Petroleum said they would continue to press ahead with oil and gas exploration and development.

Taking CNOOC as an example, Chairman Wang Dongjin said the company will strive to be a main force in domestic oil and gas reserve growth and production increase, and exploration will be intensified in key areas such as deep and deep-water zones, high-temperature and high-pressure zones and unconventional gas, raising the share of natural gas in oil and gas output across the board.

A New Round of Oil and Gas Production Upsurge among China's Big Three Oil Companies

As calls to intensify exploration and development meet rising oil prices, domestic oil and gas producers have launched a new round of production activity.

By August 1, PetroChina, Sinopec and CNOOC had all published their half-year results. Seizing the opportunity of higher international crude prices and sharply growing oil and gas market demand, the three groupsReserve growth and production increase reach a new level.

CNOOC, for instance, delivered strong results in the first half of the year in oil and gas production and in tackling core technologies.

Bohai Oilfield: achieved overproduction of both oil and gas, with 30 of 51 producing oil and gas fields above plan;

Western South China Sea Oilfield: exploration and development production exceeded the oil and gas output target and added substantial economically recoverable reserves;

Eastern South China Sea Oilfield: high-quality reserve growth and output increases alongside quality and efficiency improvement kept all indicators moving in a positive direction;

China United Coalbed Methane: the unconventional segment achieved exceptional speed, with both output and profitability at record highs.

It is reported that to support above-target oilfield production, CNOOC also made breakthroughs in oilfield services and engineering projects.

In oilfield services, its China Oilfield Services strengthened equipment and technical support,In the first half of the year, 55 sets of integrity technology equipment, 15 drilling and workover platforms and oilfield work vessels were added, with more than 700 sets of technical equipment and more than 200 large units deployed in domestic exploration and development.

"Deep Sea No.1" Energy Station

In engineering, its Offshore Oil Engineering accelerated key capacity projects, with44 engineering projects running simultaneously in 2021, and both steel processing volume and the number of individual structures built reached record highs.

In terms of major scientific and technological achievements, its Research Institute has comprehensively advanced major special research programs, consolidated national-level and group-level major achievements, made progress in exploration, development, unconventional and new energy research, and pushed the company's 13th Five-Year Plan national science and technology projects to completion.

Of course, CNOOC is not the only busy player — PetroChina and Sinopec are equally active.

According to the announcements, Sinopec's oil and gas equivalent output in the first half reached 235.29 million barrels, up 4.2% year on year, of which natural gas output was 582.62 billion cubic feet, surging 13.7% year on year. PetroChina optimized the operating efficiency of its oil and gas industrial chain in the first half and vigorously pursued quality and efficiency improvement, with most of its oil and gas products achieving growth in both volume and profitability.

China's Petroleum Industry Enters a Phase of High-Quality Development

In fact, as the three state oil companies and other producers entered a busy cycle,has already been planning the path to high-quality industry development.

On August 3, CNOOC's 2021 meeting of leading cadres was held in Beijing, requiring thorough study and implementation of the important instructions onBuilding a Maritime Power and Accelerating Exploration and Development of Deepwater Oil and Gas Resources, analysis and assessment of the situation faced, and arrangements for key tasks in the second half of the year and the period ahead.

At the meeting,Wang Dongjin, Chairman of CNOOC gave a keynote report on behalf of the CNOOC Party Group and the Board of Directors entitled "Carry forward the great founding spirit of the Party, draw strength to forge ahead, and write a new chapter of serving the country through energy on the new journey",It explicitly proposed implementing the "Three Major Projects" and "One Action" to keep advancing the development of the offshore petroleum industry.

First, focusing on the major political responsibility of safeguarding national energy security, implementCampaign for Reserve Growth and Production Increase, and work to "further strengthen" oil and gas supply capability: fight the exploration campaign with full effort and consolidate the reserve resource base;

Second, focusing on achieving high-level self-reliance in science and technology, implementCampaign for Strengthening the Foundation of Technological Innovation, and work to "step up" the tackling of key core technologies;

Third, focusing on meeting the "dual carbon" goals, implementCampaign for Leapfrog Green Development, and work to "speed up" the green energy transition;

Fourth, focusing on meeting the requirements for stable growth of the national economy, implementAction for Quality, Efficiency and Upgrading, and work to "scale new heights" in business performance.

At the same time, onInstitutional Mechanisms, Team Building and Risk Prevention and other matters, Wang Dongjin also gave the latest instructions, stressing the need to press ahead with the building of the cadre and talent team to provide solid talent support; to press ahead with the three-year action plan for SOE reform to provide solid institutional support; to press ahead with the rectification of major risks and hidden dangers to provide solid safety support; and to press ahead with Party building to provide strong political support.

On the key work of production and operation in the second half of the year,Li Yong, General Manager of the Group, Made the Deployment, he required full effort on the core oil and gas business to ensure the annual production and operation targets are met; full effort on safety production to genuinely raise the company's intrinsic safety level; full effort on technological innovation to keep strengthening technical support; full effort on reform to ensure key reform tasks land precisely; full effort on green development to accelerate industrial transformation and upgrading; and full effort on lean management to keep raising the level of modern corporate governance.

The sea is wide for fish to leap, the sky is high for birds to fly! With international oil prices providing a floor and national top-level design and the careful planning of oil and gas companies providing support,Perhaps we can optimistically foresee a promising future for China's oil and gas industry.

Note: Images and some materials are sourced from the official WeChat account of CNOOC