According to a report by Rystad Energy, China plans to increase oil and gas output in the next years to meet rising local demand and lessen the country’s record-high reliance on imports. According to the report, spending would increase until 2025, accompanied by a drilling frenzy of 118,000 wells, which will provide considerable prospects for suppliers.

China’s national oil companies (CNPC, CNOOC, and Sinopec) are expected to spend more than $120 billion on drilling and well services from 2021 to 2025 to meet rising oil and gas demand. China aims to meet more of its oil demand from domestic sources after the share of imported crude oil steadily increased from 2014 to nearly 75% last year.

An energy research analyst at Rystad Energy, Peng Li, said: “Despite a strong policy push to electrify transport, China is still expected to use oil products to fuel its hundreds of millions of cars, buses and trucks for the next five years at least. Although the country’s electric vehicle market is projected to achieve a 20% market share by 2025, internal combustion engine vehicles are expected to account for most of China’s transport needs and to provide a backbone for oil demand through 2025.”

While China’s transition to a low-carbon economy is a top objective, balancing this with the country’s transitional oil and gas needs remains critical. This is detailed in China’s 14th five-year plan, which highlights the necessity of discovering new hydrocarbon sources and boosting oil and gas output, as well as increasing non-fossil fuels’ share to 20% by 2025.

“As state-owned entities, China’s major operators are not solely profit-driven. They also play an important and integrated role in social economics. So even in a less-favorable oil price environment, we expect Chinese NOCs to perform in line with government expectations and to continue to make an effort to shore up domestic supply,” Li said.

From 1.55 billion barrels in 2014 to 1.43 billion barrels in 2020, China’s oil production has decreased. In 2020, domestic oil production met little over a quarter of China’s domestic oil consumption, with imports covering the remaining 74%, the highest level on record.

Domestic natural gas production is still small compared to overall demand, but it has increased from about 120 billion cubic metres (Bcm) in 2014 to around 190 Bcm last year, which is still far short of the 330 Bcm total demand forecast for 2020. This implies that the country would continue to rely on imported piped gas and shipping liquefied natural gas (LNG) for more than 40% of its needs.