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China’s drive to reduce its dependence on imported oil has led to the construction of a huge concrete facility near Zhuhai, resembling the size of Monaco, which serves as the centerpiece of its deepwater drilling efforts. The facility, operated by a unit of China National Offshore Oil Corp (CNOOC), is responsible for producing production platforms that will be deployed in China’s offshore oil fields.
As China’s aging onshore wells struggle to meet the country’s growing energy demands, it has become increasingly reliant on foreign crude. Currently, over 70% of China’s oil supply is imported, compared to less than 10% at the beginning of the millennium.
In an effort to mitigate this dependence, CNOOC, one of China’s three main state-owned oil firms, is aggressively investing in drilling technology to challenge the dominance of Western oil majors. However, this expansion into contested waters has also raised tensions with the United States government.
In 2021, CNOOC was blacklisted by the US, which accused the company of collaborating with China’s military to intimidate neighboring countries in the South China Sea. CNOOC has denied these allegations.
The company has made significant progress in developing China’s offshore oil fields. It has transformed the Bohai Sea into the country’s largest oil field and is expanding operations in the eastern South China Sea. Last year, offshore wells accounted for 60% of China’s new oil production.
Senior research analyst at S&P Global Commodity Insights, Baihui Yu said, “With significant untapped volumes offshore China, domestic offshore barrels are expected to become an indispensable growth engine for the coming decade.”
He added, “Technology progress and increased access have enabled more drilling to be focused into deeper waters.”
CNOOC is China’s exclusive offshore oil producer and its domestic production grew to account for 23% of the country’s total in 2021, compared with 15% in 2013, according to company filings and BP Plc data. CNOOC aims to increase its output by 4% to 6% this year and a further 12% by 2025.
However, the challenges of deepwater drilling are immense. At the Zhuhai facility, workers laboriously construct steel structures known as jackets, which are then transported offshore and submerged to support oil platforms. These jackets must withstand extreme weather conditions, making their construction and installation complex and demanding. While international oil majors like Chevron Corp. and Shell Plc possess advanced technological capabilities in this sector, CNOOC is rapidly closing the gap.
CNOOC’s achievements include building the largest jacket in Asian history for the Haiji-1 field and expanding exploration into deeper waters. The company expects to produce between 650 and 660 million barrels of oil equivalent this year and is also involved in global projects such as Exxon Mobil’s significant oil discovery off the coast of Guyana.
CNOOC’s technical progress has made previously economically unviable offshore fields now feasible for development. Despite geopolitical challenges and the dominance of Western oil majors CNOOC is catching up.
