A drilling machine works in the Yingdong field of Qinghai Oilfield Co, a subsidiary of China National Petroleum Corp (CNPC), the country’s largest oil and gas producer and supplier. The CNPC branch, situated in Northwest China’s Qinghai Province, had a record output of crude oil in 2019 reaching 2.28 million tons, the company said Sunday. Photo: cnsphotos

 
China's domestic crude oil production reached 191 million tons in 2019, an increase of 1.1 percent year-on-year, which reverses the downward trend of recent years, according to a report released on Monday by CNPC Economy & Technology Research Institute.

According to the report, China’s net imports of crude oil exceeded 500 million tons for the first time in 2019, up 9.5 percent year-on-year, and its crude oil import independence ratio rose to 72.5 percent, up 1.6 percentage points from 2018. 

Natural gas output was 173.8 billion cubic meters in 2019, up 9.8 percent year-on-year, hitting a record high, the report said.

"China’s domestic crude oil output in 2019 has reversed the downward trend for several consecutive years," said Jiang Xuefeng, deputy president of CNPC Economy & Technology Research Institute.

However, the main growth of oil and gas production in 2019 came from unconventional areas such as tight oil, which has a high cost of exploitation, Jiang said, indicating that domestic oil giants may have a difficult time making profits.

Jiang advised that oil companies should further strengthen the growth of oil and gas reserves and production, improve crude oil’s supply side structural reform, optimize the domestic business environment, and promote foreign enterprises to further engage in China’s oil and gas upstream sectors.

The report states that China's domestic oil and gas production in 2020 is expected to reach 194 million tons and 190 billion cubic meters, respectively. 

"As for international perspectives, China’s oil supply may be risky due to the tension between the US and Iran. Data shows that China’s imports of Iranian crude oil were about 300,000 barrels per day in 2019, half the level from 2016 to 2018. Therefore, oil companies should maintain diversified crude oil imports and increase domestic oil reserves," Jiang said.

Liu Chaoquan, deputy president of CNPC Economy & Technology Research Institute, said that while geopolitical factors may increase oil prices in the short term, a significant rise in international oil prices is unlikely given the global fundamentals of oil supply and demand.

The report estimates that the average price of Brent oil in 2020 will be $60-65 per barrel.