Iron Man Wang Jinxi, a heroic Chinese oil pioneer, famously jumped into a pit of drilling mud to stop a well blowout. A key figure in the discovery of Daqing, China’s biggest oilfield, Wang died in 1970. Less dramatically, but importantly, the Chinese oil industry has been revived and, since 2018, turned around years of decline.
China is probably the biggest oil producer people don’t think of. Only five countries currently surpass the 4.16 million barrels per day it extracted last year. Yet it is far less-watched than smaller but more celebrated producers including Brazil, Norway, Libya and Nigeria.
The outlook for China's oil industry is important for global energy balances, for its national security and for the fortunes of its major state oil companies, Sinopec, the China National Offshore Oil Corporation (CNOOC) and the big cheese, the China National Petroleum Corporation (CNPC).
Despite its substantial land mass, China seemed to be nearly devoid of oil until it found Daqing in 1959, Shengli in 1961 and other fields in its north-east, and production boomed during the 1970s. Remarkably, China was a net oil exporter as late as 1992.
But then its own massive appetite outstripped domestic resources. Although production kept creeping up until 2015, it became by far the world’s biggest oil importer.
Output dropped for the next three years, as oil prices fell and the Chinese majors cut back investment. But in the summer of 2018, China’s President Xi Jinping, concerned about domestic energy security amid the emerging US-China trade war, demanded priority for self-sufficiency over commercial returns.
The three major national oil companies released seven-year action plans and raised their upstream investment budgets substantially.
Since then, growth has been solid, with almost 100,000 barrels per day added each year on average, and this year has begun strongly. Opec’s outlook sees Chinese production only creeping up by 10,000 barrels per day this year and next year, but this seems pessimistic.
It is possible that China might exceed its all-time annual high, 4.3 million barrels per day, this year or next year. Every drop at home is a drop not imported, and its impact will be magnified if, as expected, China’s oil demand peaks some time this decade.
Conversely, the big state companies’ international upstream investment has been quite minor, in contrast to the previous boom period from 2005 to 2013, when they made aggressive acquisitions and won bidding wars in countries from Kazakhstan and Iraq to Canada and Colombia.
Recently, they have concentrated on liquefied natural gas rather than oil. Iraq’s latest bid round, in May, was dominated by Chinese companies, but smaller private or quasi-private entities, not the state giants.
The domestic growth has been hard-won. China’s geology is complex and its existing fields have been heavily exploited already. Last year, the three state majors invested about $78 billion, compared with $65 billion between their three biggest international competitors, Shell, ExxonMobil and Chevron.
But Opec’s production restrictions and push for higher prices give the Chinese companies solid cashflow, and allow them to go after higher-cost resources.
The majority of production growth comes from offshore fields, led by CNOOC. This month, it debuted Asia’s first circular floating production platform, used to develop fields in moderate water depths but harsh weather. The South China Sea is prone to strong typhoons.
China has also aggressively pushed out exploration in this area, and sought to deter neighbours, notably Vietnam and the Philippines, from developing fields in contested waters.
In the scrubby deserts of the far western Tarim Basin, Sinopec is drilling some of the deepest wells in the world. In March, the Shendi Take-1 well passed 10,000 metres, only the second well globally to go so deep. It encountered temperatures more than 200°C.
The company is developing the Shunbei field in this area. At about 8,000 metres, it is one of the world’s deepest commercial deposits.
Coaxing the last drops out of mature oilfields requires enhanced oil recovery (EOR) – a suite of techniques that inject carbon dioxide, steam, chemicals or other substances. While only about 40 per cent of the oil in the ground may be recoverable conventionally, EOR can boost that to 60 per cent.
Shengli and Daqing both use extensively the injection of polymers, which thicken water so that it pushes out the oil more effectively.
Carbon dioxide EOR has the additional advantage of trapping some of the global warming gas underground permanently. It can also reduce the need for water injection to maintain pressure, which is helpful in often water-stressed areas of China.
Sinopec is using the technique at its Shengli field, capturing carbon dioxide from petrochemical facilities and, in future, power plants. As much as 3.6 billion barrels of oil could be produced economically in China in this way.
Finally, what about the prospects of China replicating the US’s shale boom? China does have shale oil resources, with CNPC reporting from 20 billion to 35 billion barrels in place in its basins.
But the shale reservoirs are complex, often deep, low-permeability and frequently with rather heavy oil. China has also not advanced as far technologically in shale as the US.
Last year, it produced about 80,000 barrels per day, a far cry from the US, which extracts more than a hundred times as much. Even if it reaches an ambitious target of 200,000 barrels per day by 2035, this would not change the overall picture much.
It has been more successful in shale gas, mostly in the south-western Sichuan region, but still falls short of its trans-Pacific competitor.
In 2020, the Chinese government decided to open upstream participation to other companies beyond the big state-owned ones. International companies previously had some joint ventures with their Chinese counterparts, but with underwhelming results.
Western capital isn’t likely to pour in this time, given political tensions, but China’s own smaller companies, so prominent in Iraq, might play a bigger role at home and bring some more innovative approaches.
So petroleum production in China looks like an increasingly steep uphill climb. Nevertheless, it probably will keep ascending for some years, given the resources, the intensity of investment and the importance to its national mission.
The days of Iron Man Wang are over – today the diligent toil of Chinese geologists and engineers tackles its tricky oilfields.
Robin Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis
Naga
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Citadel: Honey Bunny first episode
Directors: Raj & DK
Stars: Varun Dhawan, Samantha Ruth Prabhu, Kashvi Majmundar, Kay Kay Menon
Rating: 4/5
MATCH INFO
Newcastle United 2 (Willems 25', Shelvey 88')
Manchester City 2 (Sterling 22', De Bruyne 82')
Women’s World T20, Asia Qualifier
UAE results
Beat China by 16 runs
Lost to Thailand by 10 wickets
Beat Nepal by five runs
Beat Hong Kong by eight wickets
Beat Malaysia by 34 runs
Standings (P, W, l, NR, points)
1. Thailand 5 4 0 1 9
2. UAE 5 4 1 0 8
3. Nepal 5 2 1 2 6
4. Hong Kong 5 2 2 1 5
5. Malaysia 5 1 4 0 2
6. China 5 0 5 0 0
Final
Thailand v UAE, Monday, 7am
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Persuasion
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Profile box
Founders: Michele Ferrario, Nino Ulsamer and Freddy Lim
Started: established in 2016 and launched in July 2017
Based: Singapore, with offices in the UAE, Malaysia, Hong Kong, Thailand
Sector: FinTech, wealth management
Initial investment: $500,000 in seed round 1 in 2016; $2.2m in seed round 2 in 2017; $5m in series A round in 2018; $12m in series B round in 2019; $16m in series C round in 2020 and $25m in series D round in 2021
Current staff: more than 160 employees
Stage: series D
Investors: EightRoads Ventures, Square Peg Capital, Sequoia Capital India
The%C2%A0specs%20
%3Cp%3E%3Cstrong%3EEngine%3A%3C%2Fstrong%3E%20Dual%20synchronous%20electric%20motors%20%20%0D%3Cbr%3E%3Cstrong%3EPower%3A%20%3C%2Fstrong%3E646hp%0D%3Cbr%3E%3Cstrong%3ETorque%3A%20%3C%2Fstrong%3E830Nm%0D%3Cbr%3E%3Cstrong%3ETransmission%3A%20%3C%2Fstrong%3ETwo-speed%20auto%20(rear%20axle)%3B%20single-speed%20auto%20(front)%20%0D%3Cbr%3E%3Cstrong%3EPrice%3A%20%3C%2Fstrong%3EFrom%20Dh552%2C311%3B%20Dh660%2C408%20(as%20tested)%0D%3Cbr%3E%3Cstrong%3EOn%20sale%3A%20%3C%2Fstrong%3Enow%3C%2Fp%3E%0A
Most sought after workplace benefits in the UAE
- Flexible work arrangements
- Pension support
- Mental well-being assistance
- Insurance coverage for optical, dental, alternative medicine, cancer screening
- Financial well-being incentives
Panipat
Director Ashutosh Gowariker
Produced Ashutosh Gowariker, Rohit Shelatkar, Reliance Entertainment
Cast Arjun Kapoor, Sanjay Dutt, Kriti Sanon, Mohnish Behl, Padmini Kolhapure, Zeenat Aman
Rating 3 /5 stars
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
MATCH INFO
What: India v Afghanistan, first Test
When: Starts Thursday
Where: M Chinnaswamy Stadium, Bengalaru
How much of your income do you need to save?
The more you save, the sooner you can retire. Tuan Phan, a board member of SimplyFI.com, says if you save just 5 per cent of your salary, you can expect to work for another 66 years before you are able to retire without too large a drop in income.
In other words, you will not save enough to retire comfortably. If you save 15 per cent, you can forward to another 43 working years. Up that to 40 per cent of your income, and your remaining working life drops to just 22 years. (see table)
Obviously, this is only a rough guide. How much you save will depend on variables, not least your salary and how much you already have in your pension pot. But it shows what you need to do to achieve financial independence.
DMZ facts
- The DMZ was created as a buffer after the 1950-53 Korean War.
- It runs 248 kilometers across the Korean Peninsula and is 4km wide.
- The zone is jointly overseen by the US-led United Nations Command and North Korea.
- It is littered with an estimated 2 million mines, tank traps, razor wire fences and guard posts.
- Donald Trump and Kim Jong-Un met at a building in Panmunjom, where an armistice was signed to stop the Korean War.
- Panmunjom is 52km north of the Korean capital Seoul and 147km south of Pyongyang, North Korea’s capital.
- Former US president Bill Clinton visited Panmunjom in 1993, while Ronald Reagan visited the DMZ in 1983, George W. Bush in 2002 and Barack Obama visited a nearby military camp in 2012.
- Mr Trump planned to visit in November 2017, but heavy fog that prevented his helicopter from landing.
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The President's Cake
Director: Hasan Hadi
Starring: Baneen Ahmad Nayyef, Waheed Thabet Khreibat, Sajad Mohamad Qasem
Rating: 4/5
Countries recognising Palestine
France, UK, Canada, Australia, Portugal, Belgium, Malta, Luxembourg, San Marino and Andorra
THE SPECS
Engine: 4.4-litre V8
Transmission: Automatic
Power: 530bhp
Torque: 750Nm
Price: Dh535,000
On sale: Now
Wicked: For Good
Director: Jon M Chu
Starring: Ariana Grande, Cynthia Erivo, Jonathan Bailey, Jeff Goldblum, Michelle Yeoh, Ethan Slater
Rating: 4/5
Russia's Muslim Heartlands
Dominic Rubin, Oxford
The biog
Favourite book: Homegoing by Yaa Gyasi
Favourite holiday destination: Spain
Favourite film: Bohemian Rhapsody
Favourite place to visit in the UAE: The beach or Satwa
Children: Stepdaughter Tyler 27, daughter Quito 22 and son Dali 19
