Opportunities for and Challenges Facing China's Oil and Natural Gas Exploration and Development in a Low-carbon Economy

Opportunities for and Challenges Facing China's Oil and Natural Gas Exploration and Development in a Low-carbon Economy

Available online at www.sciencedirect.com Energy Procedia 5 (2011) 2048–2053 IACEED2010 Opportunities for and Challenges Facing China’s Oil and Nat...

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Available online at www.sciencedirect.com

Energy Procedia 5 (2011) 2048–2053

IACEED2010

Opportunities for and Challenges Facing China’s Oil and Natural Gas Exploration and Development in a Low-carbon Economy Wang Yiganga , Guo Shaobina, Yu Wenyingb a

b

School of Energy Resources, China University of Geosciences, Beijing 100083, China E&D Research Institute of Liaohe Oil-field Company, PetroChina, Panjin, Liaoning, 124010, China

Abstract The composition of energy resource consumption reflects the reliance on energy resources of a country and trends in consumption. In this paper we analyze the characteristics of energy resource consumption in China by comparing China's consumption composition with that of other countries and studying recent trends in internal energy resource consumption in China. Although new energy resources have been developed and utilized to some degree, energy resource consumption will mainly rely on fossil fuel for several decades. Therefore, increasing the proportion of oil and natural gas consumption is an effective means for decreasing environmental pollution caused by the overall consumption of fossil fuels, which currently consists primarily of coal. The increasing demand for oil and natural gas can bring China's petroleum exploration and development good opportunities but there are challenges that must be faced.

© 2011 Published by Elsevier Ltd. Selection and peer-review under responsibility of RIUDS Key words: low-carbon economy; energy resource consumption; primary energy; new energy resources; exploration and development

1. Introduction With the worldwide increases in population and industrial development, there is a surging demand for energy resources in people's daily lives and numerous producing activities. Fossil fuels have played a leading role fo r a long time in global energy resource consumption, but the environmental pollution caused by the burning of fossil fuels has become increasingly worse. Fortunately, the public's awareness

Corresponding author. Mobile Phone:(+86)13911365687 E-mail address: [email protected].

1876–6102 © 2011 Published by Elsevier Ltd. doi:10.1016/j.egypro.2011.03.353

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of environmental protection has been awoken by the increasing greenhouse effect and environmental pollution in recent years. Consequently, an economic develop ment model with little energy dissipation, less pollution, and less emission—a so-called low-carbon economy—is now valued by many countries. Accompanying the country's significant economic development, China's energy resource consumption increased steadily in the past decade. The surge in fossil fuel consumption, especially that of coal, caused increases in wastewater and waste gas emission, which aggravated environment pollution. To reduce emissions and abate pollution, the Chinese government needs to address ways of changing the composition of energy resource consumption. 2. Characteristics of energy resource consumption in China According to Brit ish Petroleu m's statistics [1], in 2009 world wide consumption of primary energy resources reached 11164.3 Mtoeˈwith the percentages of oil being 34.8%, natural gas 23.8%, and coal 29.4%, as the pie graph of global consumption by fuel (Fig. 1) shows us. In developed countries, oil and natural gas are the major consumed primary energy resources, with coal consumption being less than 30%. For examp le, in the United States, the proportion of oil is 38.6% and that of natural gas is 27%; coal is only 22.8%. Japan uses even less coal, with oil accounting for 42.6% of consumption, natural gas 17%, and coal 23.5%, lower than the worldwide average. Co mparatively, in Ch ina the proportion of oil and natural gas consumption (about 18.6% and 3.7%, respectively) is much lo wer than in developed countries or than the worldwide average; the proportion of coal consumption, however, a t 70.6%, is even h igher than that of India, a nearby developing country with similar growth characteristics.

Fig. 1 Proportion of Global Consumption by Fuel in 2009.

As a major consumer o f energy resources, China consumed 2177 Mtoe of primary energy resources in 2009, rising to second place in the ran king list of energy resource consumption. Table 1 shows that China's consumption of coal amounts to 1537.4 Mtoe, about 46.9% of the total world consumption of this resource. With China's continued population growth and economic development, it is certain that China's consumption of energy resources will progressively increase every year for several years to come.

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T able 1 Global Consumption by Fuel in 2009 (units of Mtoe) USA

Germany

Russia

UK

China

India

Japan

T otal World

Oil

842.9

113.9

124.9

74.4

404.6

148.5

197.6

3882.1

Natural Gas

588.7

70.2

350.7

77.9

79.8

46.7

78.7

2653.1

Coal

498.0

71.0

82.9

29.7

1537.4

245.8

108.8

3278.3

Nuclear Energy

190.2

30.5

37.0

15.7

15.9

3.8

62.1

610.5

Hydroelectricity

62.2

4.2

39.8

1.2

139.3

24.0

16.7

740.3

T otal

2182

289.8

635.3

198.9

2177

468.9

463.9

11164.3

Fig. 2 Comparison of Fossil Fuel Production and Consumption in China

Fig. 3 Consumption Proportion of Coal, Oil, and Natural Gas in China

Figures 2 and 3 te ll us that the amount of fossil fuel consumption, principally coal consumption, has played an extremely important role in Ch ina's energy resource consumption for a long time, and the

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proportion of coal consumption increased yearly over the past several years. There are several reasons for this pattern of consumption: 1. Ch ina possesses abundant coal reserves , annually producing the most coal of any country; 2. China is a major resource consumer; its steel industries and heating and power plants primarily utilize coal as fuel; and 3. the consumption cost of coal is very lo w. But problems of high energy dissipation and excessive pollution and emissions associated with coal production and coal consumption [][][4][5] are of general concern, as are potential safety problems in coal production. Therefore, to respond to a proposed policy of a low-carbon economy, the structure of energy resource consumption in China should be changed in the future. 3. Status of the development and utilization of new energy resources As technology continues to imp rove, the development and utilization of new energy resources, including solar, wind, modern b io mass, geothermal, t idal, and hydrogen, has advanced in recent years. In contrast to traditional energy resources, these new energy resources are characterized by little pollution, massive reserves, and a regenerative capability. The develop ment and utilization of new energy resources will be significant in solving the problem of environmental pollution and exhaustion of resources [6][7]. The development and utilization of new energy resources has achieved great success in many countries, especially in developed countries such as Japan and the United States, and these new energy resources contribute much to their economic develop ment. China has only recently entered this field but it is rapid ly developing these alternative resources to some degree. In 2006, China's proportion of the solar energy photovoltaic industry was over 10% of the wo rld's total, p lacing it third in ranking [8]. Simu ltaneously, gains have been achieved in other new energy resources, notably wind, modern b io mass, geothermal, and tidal. Although great progress has been made in the develop ment and utilization of new energy resources, there is an obvious global imbalance in its distribution because of the impact of technology and the natural environment [9], and the role of these new energy resources has been rather limited in its impact on total energy resource production. According to an estimat ion by Petro China, worldwide use of renewable energy resources will increase by around 7% every year fro m 2010 to 2020, five times the rate of increase for fossil fuels, but its proportion in energy resource consumption will still be less than 1%. Therefore, it will be impossible to replace traditional resources with new energy resources in 20 to 30 years. 4. Opportuni ties for China's oil and natural gas exploration and development According to statistics, the worldwide proportion of fossil fuel consumption is greater than 80%, and the consumption demand fo r oil and natural gas increases every year. It is estimated that the oil and natural gas consumption proportions of primary energy resources will reach, respectively, 30% and 28% in 2030. The p roportion of o il and natural gas consumption will increase in Ch ina too. In the past few years, internal production of oil and natural gas has been unable to meet internal demand in Ch ina, and since 2001 every year has showed a sustained growth in oil imports. In 2009, the amount of import ed oil was about 200 million tons, comprising half o f the nation's internal oil consumption. Changing the composition of fossil fuel consumption will cause a rapid growth of oil and natural gas consumption too. Given the energy insecurity in the world [10], strengthening exploration and development in Ch ina is the only guarantee China has of finding and producing the oil and natural gas it needs.

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In evaluating China's petroleum resources in 2008 the Ministry of Land and Resources concluded that China has 108.6 b illion tons of oil, of wh ich 21.2 b illion tons is potentially exp loitable, wh ile the proven reserves comprise 28.9 b illion tons. The Ministry also indicated that the prospective resources of natural gas are 56 trillion cubic meters, of wh ich 22 trillion cubic meters is potentially exp lo itable [11]. These numbers make it obvious that there is enormous potential for petroleu m explorat ion and development in China. 5. Challenges facing China's petroleum exploration and development Undoubtedly, the market demand for o il and natural gas provides a favorable opportunity for China's petroleum exp loration and develop ment. But we must soberly recognize that China's petroleu m exploration and development faces many great challenges. First, as one increases the degree of exp loration, the difficulties of exp lorat ion become more co mplex. In a developed oil field, explorat ion tends to focus on deeper beds, which leads to increasing explo ration cost and technological d ifficu lty. Though some large-scale petroleu m reservoirs have been found in the basins located in the west and middle part of China, much hard work needs to be done to strengthen exploration in these areas. Marine exp loration affirms that there are abundant oil and natural gas resources under the seabed, but deep-water exploration technology remains a bottleneck in China. Second, although an evaluation of petroleum resources indicated that China's oil and natural gas resources are abundant, a significant portion of them are difficult to exp loit, especially into a developed oil field. So developing advanced technology and imp roving the recovery ratio are important methods to raise production of oil and natural gas. Lastly, technologies of resolving the problem of wastewater and waste gas, which are produced during the process of petroleum exp loration and develop ment, should be developed to reduce environmental pollution [12]. Obviously, these technologies need to be enhanced in China. 6. Conclusion Based on an analysis of China's energy resource consumption characteristics and by evaluating China's resources, the following conclusions can be drawn: (1) The major reasons the proportion of coal in primary energy resource consumption is much higher in China are related to China's massive coal reserves and enormous product ion as well as the cost of coal consumption being much lower than that of other energy resources. (2) The development and utilizat ion of new energy resources is limited, and fossil fuels will continue to play an important role in energy resource consumptio n for decades. (3) To decrease pollution and protect the environment, one feasible method is to increase the proportion of oil and natural gas consumption to reduce the emission caused by coal consumption. (4) There is a broad prospect for Ch ina's petroleum explorat ion and development, but simultaneously the challenges facing these tasks are tremendous. References [1] BP Statistical Review of World Energy, June 2010 [2] Sakaguchi J. Best mix of primary energy resources by renewable energy and fossil fuel with CCS in view of security, stability and sustainability-A vision on hydrogen supply chain by organic chemical hydride method. Sci China T ech Sci, 2010, 53: 62−68

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[3] Leif Gustavsson, Lisa Eriksson, Roger Sathre. Costs and CO2 benefits of recovering, refining and transporting logging residues for fossil fuel replacement.Applied Energy, 2011, 88 :192–197 [4] Intergovernmental Panel on Climate Change. Climate change 2007. The physical science basis. Contribution of working group I to the fourth assessment report of the intergovernmental panel on climate change. UK:Cambridge University Press; 2007. [5] Konstantinos I. Vatalis. Evaluation of sustainability by a population living near fossil fuel resources in Northwestern Greece. Journal of Environmental Management , 2010, 91:2581-2589 [6] Meenakshi Kaul, G. M. J. Mohren, V. K. Dadhwal. Carbon storage versus fossil fuel substitution: a climate change mitigation option for two different land use categories based on short and long rotation forestry in India. Mitig Adapt Strateg Glob Change, 2010, 15:395–409 [7] Simon J., M tiller H.P, Koch R, et a1.Thermoplastic and biodegradable polymers of cellulose [J].Polymer Degradat ion and Stability,1998,59:107-115. [8] Xu Hongxing. Energy Utilization in China and Countermeasures[J]ˈSINO-GLOBAL ENERGY, Vol.15, No.1,January, 2010(3-14) [9] Hamelinck CN, Suurs RAA, Faaij PC. International bioenergy transport costs and energy balance. Biomass Bioenergy 2005;29(2):114–34. [10] Nicolas Lefevre. Measuring the energy security implications of fossil fuel resource concentration. Energy Policy, 2010, 38:1635–1644 [11] Li Gansheng. Great Achievements of Oil-Gas Exploration & Development in 60 Years since the Founding of the New China and Its Prospect [J]. Petroleum & Petrochemical Today. Vol.17, No.9, 2009(1-8) [12] GONG Yan-fen, XU Hang, YANG Qian, The Strategy Ideas about Improving the Vigor of Environmental Protection in China's Petroleum Corporate[J], Science Technology and Industry. Vol.10, No.7,July, 2010(40 -42)

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