USEUROPEAFRICAASIA 中文双语Français
Home / Ethiopia Special

Tahe discovery a win for Sinopec

By Wang Yu | China Daily | Updated: 2007-09-07 06:31
Tahe discovery a win for Sinopec

It is a land of cantaloupes, but this year's most exciting harvest in Xinjiang Uygur, China's western-most autonomous region, could be reaped by Sinopec.

Sinopec, or the China Petroleum & Chemical Corp, is Asia's largest refiner and one of China's two largest oil and gas companies.

With the company's new finds of natural reserves, its crude oil output from Xinjiang is expected to increase from last year's 4.7 million tons, or 10 percent of the company's 2006 total, to more than 5.3 million tons this year.

Some of the added output will come from the desert of Tarim, where Sinopec confirmed a new discovery of as much as 200 million tons of oil and gas reserves last month.

It could be just what the company needs as it faces an increasing challenge from rival PetroChina, which for the last few weeks has been touting its new oil and gas discoveries, believed to be the largest in many years.

Liu Gu, an analyst with the Guotai Jun'an Securities, reveals that "based on the assumption that the oil price will be well above $60 per barrel, we believe the new (Tarim) discovery will add to the value of Sinopec's proven exploitable reserves by 5 to 6 percent".

Liu forecasts that once the newly found reserves are converted into full-scale production, "the market value of Sinopec may see a 10 percent rise in the long run".

Liu's analysis was based on the assumption that 30 to 50 percent of the geological reserve will be recoverable.

Sinopec announced at the end of May its "breakthrough" in Block 12 of the Tahe (short for Tarim River) Oilfield that covers almost 900sqkm and holds estimated geological reserves of up to 200 million tons (1.47 billion barrels) of oil equivalent.

The new find at Tahe strengthened Sinopec's confidence in expanding the oilfield into a 10-million-ton-per-year production base. The northwestern branch of Sinopec has decided to drill 90 to 120 wells at Block 12 of Tahe to tap the reserve, Sinopec Group says in its in-house newsletter.

Company spokesman Huang Wensheng says it is still too early to evaluate the asset value brought by the newly announced discovery at Tahe. He confirmed that Sinopec does have plans to gear up its operations to produce more oil and gas from its Xinjiang assets.

"We expect to increase our Xinjiang production by 14 percent this year, reaching 5.3 million tons in 2007," according to an anonymous source from Sinopec Group.

The Sinopec source says the new discovery carries great significance for Sinopec, as the company was already strong in natural gas exploration and production, but relatively weaker in extracting more crude oil during recent years.

The unidentified Sinopec source contends the new discovery at Tahe will help the northwestern branch of Sinopec meet its production growth target for 2007. But he implied that more wells would have to be deployed to further realize the reserve potential at Block 12 of Tahe.

"Many new wells are planned at Block 12 to further tap the potential and determine exploitable reserves, perhaps by October this year," the Sinopec source adds, but declines to reveal the exploration budget.

New wells planned

"Since our exploration plan is subject to modification in line with actual findings in practice, we cannot set the budget or determine the specific number of new wells to be drilled for the time being," the Sinopec insider says.

Sinopec's spending on exploration will account for 45 percent of its total 2007 expenditure as it drills in oil- and gas-rich areas, such as Sichuan Province and Xinjiang. Sinopec recently established a subsidiary to bolster oil and gas exploration as the company seeks "large and middle-sized" oil and gas fields.

As Asia's largest refiner, Sinopec imported 70 percent of its crude last year. Soaring oil prices last year widened the company's 2006 refining loss to 25.3 billion yuan from 3.54 billion yuan a year earlier.

That leaves the firm little option other than to expand into upstream production, according to analyst Liu Gu. "That is why the new discovery carries great significance to the top Asian refiner."

Should 30 percent of Tahe's deposits turn out to be recoverable, the field's proven reserves may reach 500 million barrels, Gordon Kwan, head of oil and gas research at CLSA Ltd in Hong Kong, tells Bloomberg News.

Resource-rich

Boasting robust energy reserves, the Xinjiang Uygur Autonomous Region of Northwest China has the potential to top the country's energy grid, according to the National Development and Reform Commission (NDRC), China's top economic planner, and the Xinjiang regional authority.

Over the next three years, China's top two energy giants, PetroChina and Sinopec, are expected to double output from Xinjiang to 44 million tons of oil equivalent, the NDRC website says. The plan may enable Xinjiang to match Heilongjiang Province as China's top oil-production powerhouse.

The target is feasible, based on the large reserves in Xinjiang and the huge investment to be injected into the region, a Sinopec oil expert says. PetroChina and Sinopec poured a total of 68.6 billion yuan into Xinjiang for oil and gas exploration and production from 2005 to 2006, according to the NDRC.

PetroChina, the country's top oil producer, said in its recent annual report that its proven crude oil reserves in the Xinjiang oil area of the autonomous region were 1,306.6 million barrels (178.3 million tons) in 2006, representing 11.2 percent of the firm's total proven crude oil reserves.

The company's Xinjiang oil region produced an average of 244,200 barrels (33,315 tons) of crude oil per day last year, about 10.7 percent of its total crude oil production. The Xinjiang oil region, located in the Junggar basin, is one of PetroChina's three largest crude oil-producing properties.

As of December 31, 2006, PetroChina's proven crude oil and gas reserves in its Tarim oil and gas region of Xinjiang were 523.9 million barrels (71.5 million tons) and 409.2 billion cubic meters (bcm). In 2006, PetroChina produced 10.5bcm of natural gas from the Tarim oil and gas region.

Sinopec's output from its Tahe Oilfield in the Xinjiang Uygur Autonomous Region hit around 4.7 million tons of oil equivalent last year, accounting for about 10 percent of its total production.

Ismail Tiliwaldi, chairman of the Xinjiang Uygur Autonomous Region, estimates that 2006 crude oil production was 24.8 million tons and natural gas output was 16.1bcm.

(China Daily 09/07/2007 page44)

Today's Top News

Editor's picks

Most Viewed

Copyright 1995 - . All rights reserved. The content (including but not limited to text, photo, multimedia information, etc) published in this site belongs to China Daily Information Co (CDIC). Without written authorization from CDIC, such content shall not be republished or used in any form. Note: Browsers with 1024*768 or higher resolution are suggested for this site.
License for publishing multimedia online 0108263

Registration Number: 130349
FOLLOW US