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Oil and Gas

Industry Overview

Oil makes up 17% of China’s energy mix and the country’s oil reserves will only last until about 2025 at current production levels. Sinopec controls 60% of total crude distillation capacity, while PetroChina accounts for 38%. The remainder is processed by smaller refineries. SOEs account for 66% of the market and are very well-established for well-drilling equipment. Small- and medium-sized private Chinese companies make up 19% of the market and are producing mainly individual stand-alone equipment. Foreign companies make up 15% of the market and supply advanced complete-set equipment. Key international players have established their presence in China mostly through partnering with Chinese companies.

Natural gas makes up almost 4% of China’s total energy consumption and is developing rapidly due to increases in demand from the chemicals industry and household needs for heating and cooking fuel. China will require around 200bcm of natural gas per year by 2020, an almost four-fold increase from current consumption. The government has set a target of increasing gas to 10% of China’s energy consumption by 2020 which will make it the largest consumer of natural gas in Asia sometime in the next 10 years.

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Market Opportunities

Currently, most of China’s technology is focused on the exploitation and processing of its domestic light crude oil – domestic equipment accounts for about 90% of this sector. However, limited domestic reserves have forced China to exploit more of its heavy crude reserves and to import increasing quantities of heavy crude oil. This type of oil is more difficult to recover from the ground, more difficult to refine, and more polluting than light crude; thus requiring advanced technology.

China also has over 1,000 trillion cubic feet of shale gas reserves. Development of China’s inland shale gas is a promising market, but the region is hampered by poor logistics and scarce water resources.

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Best Prospects

In general, areas with high government support and low domestic product maturity offer the best prospects for foreign companies. Exploitation technologies enjoy strong government support. Specifically, Steam-Assisted Gravity Drainage (onshore), Geologic exploration equipment, position navigation systems, and deep-water drill systems (offshore) are technologies and equipment that enjoy high demand from Chinese companies.

Onshore recovery The Energy Conservation Plan states that optimization technologies should be applied to oil exploitation systems; energy saving supplementary technologies to heavy crude hot exploitation; optimized operation technologies to water filling systems; comprehensive energy saving technologies for oil and gas enclosed collection and transmission, and recovery and reutilization technologies for discharged natural gas.

Offshore recovery The Chinese onshore recovery industry relies on domestic manufacturers for some 90% of its equipment. However, there is still a need for foreign assistance in geologically complex extraction technology and advanced thermal recovery technology for heavy crude.

Heavy crude refining Refineries that are being upgraded, expanded or newly-built will all need hydrocrackers and delayed cokers to process increasing amounts of heavy crude. Hydro-treaters are needed to filter out pollutants, such as sulphur and nitrogen, to comply with EURO III standards and to increase combustion efficiency.

Petrochemical refining Sinopec and PetroChina have announced major programs to expand their olefins and derivatives capacity. However, the biggest growth area is ethylene production. All major Chinese producers already use ethylene steam cracking technology constructed by or licensed from foreign companies. SOEs are mostly interested in acquiring patented technological processes and technical expertise.

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Regular Environment

Current government policies 1) emphasize the use of high-efficiency technologies to develop low-grade oil & gas resources and improve oil recovery ratios; 2) encourage the replacement of fuel oil (light oil) with clean coal, petroleum coke and natural gas; 3) call for an acceleration of coal-to-liquids projects; 4) call for acceleration in the construction of oil bases and to strengthen oil pipelines and networks; 5) pursue petroleum-saving and consolidation policies in the electric power, petrochemical, metallurgical, building material, chemical, and transport industries; 6) call for implementation of fuel economy standards and a clean automobile action plan for motor vehicles; and 7) consolidate small oil burning units.

Onshore recovery The Energy Conservation Plan states that optimization technologies should be applied to oil exploitation systems; energy saving supplementary technologies to heavy crude hot exploitation; optimized operation technologies to water filling systems; comprehensive energy saving technologies for oil and gas enclosed collection and transmission, and recovery and reutilization technologies for discharged natural gas.

Offshore recovery Developing deep-sea oil reservoirs have become the government’s new strategy to increase oil production. The government plans to double the amount of offshore oil exploitation between 2003 and 2010. Since recovery is still highly dependent on foreign technology, the government gives favorable tariffs for imported offshore oil recovery facilities, and imports of key equipment is exempt from import taxes altogether.

Heavy crude refining The Chinese government has adopted a series of measures, such as raising the transportation fuel standards and replacing the collection of road maintenance fees and other fees with fuel consumption tax as well as the use of public transportation systems, to encourage oil refiners to produce higher quality and cleaner fuel and fuel consumers to save energy. Currently, a EURO III–equivalent standard is in effect across China. The city of Beijing is to implement EURO IV standards in 2008 as part of its drive for a Green Olympics. Other large cities are expected to follow suit, and the standard will be adopted nationwide in 2010. Refinery capacity is to increase 31% during the 11th Five-year Plan so as to reduce dependence on imports of refined products. There are plans to increase the number of refineries from 9 in 2006, to 20 refineries by 2010, and 31 by 2015 – each with a capacity of 10 million tons of crude oil per year.

Petrochemical refining The National Climate Change Plan places special emphasis on the production of one petrochemical: ethylene. This substance is the most important synthetic organic chemical in terms of volume, sales value and number of derivatives. In the Energy Conservation Plan, the government aims to optimize raw material (ethylene) structure, retrofit ethylene cracking furnace with advanced technology, optimize quenching system operation, and improve facilities management. Also, it plans to have 30 one-million ton ethylene plants in China by 2015, of which about 11 million tons in capacity must be completed by 2010. [Among this, 6.2 million tons is to be added by seven major ethylene projects while retrofitting and expansion will contribute 4.4 million tons]. Foreign companies must form JVs with a Chinese partner in order to produce ethylene (and the Chinese partner must hold a majority share). Foreign investment is encouraged as a means to provide raw materials and advanced technology.

Natural gas The Chinese government is continuing its efforts to create a more transparent gas environment to encourage investment by creating a gas law and appropriate downstream gas regulations. Currently, most regulations focus on the importing and pricing of LNG.

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Reports and Statistics

China Greentech Initiative Reports
This is an energy-focused open source commercial collaboration of over 80 of the world's leading technology companies, services firms, entrepreneurs, investors, NGOs and policy advisors, united to contribute to a sustainable China.

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Major Trade Shows

This section provides a listing of upcoming oil and gas-related events in China, including industry shows and trade missions. While FCS China is directly involved with some of these events, the others listed here have no direct relationship with the FCS and are listed solely as a convenience to our users.

For more information, please contact the organizing group as listed in the event description. Verify the information before making any commitments - we are not responsible for accuracy of information or changes in events' schedules.

China International Petroleum & Petrochemical Technology and Equipment Exhibition (CIPPE/CIOOE 2010)

March 22-24, 2010 Beijing, China


The Commercial Service of the U.S. Embassy in Beijing is pleased to invite U.S. firms to showcase their equipment and services in our “U.S. Pavilion” at CIPPE/CIOOE 2010. CIPPE, with nine years of track record, is the most influential and well established event of its kind in Asia, showcasing an array of companies interested in China’s oil & gas and petrochemical industries. CIPPE offers U.S. firms an excellent opportunity to export to China. (Read More)

(Shanghai) International Petrochemical Technology and Equipment Exhibition

Dates: August 22-24, 2011
Venue: Shanghai New International Expo Center
Website: http://www.cippe.com.cn/shanghai/

Shanghai International Petroleum & Petrochemical Exhibition (SIPPE)

Dates: November 25-27, 2010
Venue: Shanghai New International Expo Center
Website: http://www.sippe.org.cn/

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Useful Websites

Links to non-Commercial Service organizations are provided solely as a convenience to our users. The Commercial Service makes no representations about the accuracy or suitability of the information provided on the following web sites. The FCS is not responsible for the content of the individual organization webpages found through these links, and their inclusion here should not be understood as an endorsement of these organizations.

Pipeline and Valve:
http://www.cnpv.com/

http://www.chinapipe.net/

Petroleum and Petrochemical Equipment:
http://www.wwce.net/

http://www.chemnet.com.cn/

http://www.jx.cn/

http://www.oillink.com.cn/

http://www.oilinfo.com.cn/

http://www.sinopec.com.cn/

http://www.cnpc.com.cn/

http://www.petrochina.com.cn/

http://www.cnooc.com.cn/

http://www.sinochem.com.cn/

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U.S. Commercial Service Specialists

The U.S. Commercial Service offers a broad array of market entry services to U.S. companies in the oil and gas industry. Please refer to the following relevant contacts for additional information on how we can help you expand your business in China.

Beijing Office:
Tel: (86-10)8531-3000
Fax: (86-10)8531-3701
Jianhong Wang

Shanghai Office:
Tel: (86-21)6279-7630
Fax: (86-21)6279-7639
Ricardo Pelaez

Juliet Lu

Guangzhou Office:
Tel: (86-20)8667-4011
Fax: (86-20)8666-6409
Lena Yang

Chengdu Office:
Tel: (86-28)8558-3992
Fax: (86-28)8558-3991
Cui Shiyang

Shenyang Office:
Tel: (86-24)2322-1198
Fax: (86-24)2322-2206
Liu Yang

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