China Steps Up Game With 1st ‘Floating Oil Factory’
China has delivered its first smart floating production storage and offloading (FPSO) with land-sea integrated operation system, marking a breakthrough in the country's application of the digital twin technology. The offshore oil and gas FPSO with a storage capacity of 100,000 tons is the first of its kind in China and employs diverse cutting-edge technologies including artificial intelligence (AI), edge computing, cloud computing, big data and the internet of things (IoT). The ship can process oil and gas on the sea thus eliminating the need for piping from offshore rigs to onshore factories.
The ship is equipped with more than 8,000 sensors that monitor temperature, pressure and liquid level data and transmits it to the server room. In addition to the on-board system, China has also built a digital twin of the ship onshore in the smart control center in Shenzhen City, a full 1,000 kilometers away from the real ship. The digital twin, a virtual replica of the offshore ship, will be used to monitor the production process in real-time.
Floating oil and gas processing and storage platforms are becoming increasingly popular. Last year, Demand for LNG floating storage and regasification units (LNG-FSRUs) recorded a sharp increase as Europe scrambled to fill its gas stores ahead of winter. Demand for LNG imports intensified after the ruptures on the key Nord Stream pipeline system quashed any prospect of Russia turning its gas taps back on. This forced dozens of countries in Europe to turn to FSRUs or floating LNG terminals, which are essentially mobile terminals that unload the super-chilled fuel and pipe it into onshore networks.
Currently, there are 48 FSRUs in operation globally, with Rystad Energy revealing that all but six of them are locked into term charters.
According to energy think-tank Ember, the EU has lined up plans for as many as 19 new FSRU projects at an estimated cost of €9.5bn.
The biggest beneficiaries are Korean shipbuilding, for whom FSRUs are a major revenue-generator. South Korea is the definitive world leader in the FSRU sector, and recently built the country's first ammonia FSRU.
By Alex Kimani for Oilprice.com
China Is Quickly Becoming The World’s Largest Refiner
- IEA: China is on its way to becoming the country with the greatest oil refining capacity in the world.
- China overtook the United States to become the world’s largest refiner last year.
- China’s total refining capacity could total 19.7 million barrels daily by 2028.
In its new medium-term report on oil that came out last week, the International Energy Agency predicted that oil demand will peak by 2028.
This is not the first time the IEA is predicting peak oil and the reason is also the same as the reason for previous predictions to this tune: a surge in EV adoption that would displace demand for fuels.
Yet the new IEA report also mentioned something else that would probably make politicians in Europe and North America who want to ban internal combustion engines quite happy.
What the report mentioned was that China is on its way to becoming the country with the greatest oil refining capacity in the world. And this would make it the single biggest supplier of things like gasoline and diesel to the world. With the power to dictate prices.
This is what Reuters columnist Clyde Russell noted this in a column dedicated to this part of the IEA report. “China's refined product exports are subject to quotas granted by Beijing, which acts more in what it deems the interests of the domestic economy and markets, rather than what the global markets may be signalling,” Russell wrote.
The IEA itself also recognised China’s growing role as fuel supplier to the world by pointing out that “Crucially, our forecast for product balances is heavily dependent on higher Chinese product exports, especially for diesel.”
China overtook the United States to become the world’s largest refiner last year, the IEA also noted in its report, but it is not stopping there. Instead, refiners in China are building even more capacity, with the total set to reach 19.7 million barrels daily by 2028. Of this, more than 3 million barrels daily will be spare capacity, the IEA said.
The presence of this spare capacity suggests that China may be planning to really become the world’s fuel supplier after European and U.S. refiners shut down their facilities under the weight of ICE phase-out mandates or convert them to biofuel production plants. Because China knows that you can’t ban ICE cars and switch entirely to EVs.
China is not only the world’s biggest refiner of oil. The country is also the biggest market for electric vehicles in the world. The IEA forecast that by 2028, there will be more than 155 million EVs sold in total globally. More than half of these cars, the report added, will be sold in China.
Already, China accounts for more than half of global EV sales. Yet at the same time it is building more oil refining capacity. On the face of it, this may look odd and possibly even irrational. It could indeed be a miscalculation and China could end up with several million barrels in unused and unusable oil refining capacity as demand for fuels slumps.
On the other hand, it might be the same thing that China is doing with wind, solar, and coal. One of the other things that the country is the biggest in is wind and solar generation capacity. At the same time, it is also the most active builder of new coal plants, too. Because, as stated by government officials, China is all in on all energy and is not picking favourites.
China is going to become the world’s refiner. The size of its exports will depend on what the ruling party decides should be exported. And this means that China will have its hand on the global fuel price lever the way OPEC has its hand on the crude oil price lever.
Those ICE bans in the EU, Britain, and California might end up being a necessity rather than a transition-happy whim. And even then, there will be no escape from dependence on China: the biggest producer and processor of battery minerals in the world.
By Irina Slav for Oilprice.com
China Bets On Ultra-Deepwater Oil And Gas
- China’s CNPC is venturing into ultra-deepwater oil and gas exploration.
- Deepwater production remains the fastest-growing upstream oil and gas segment.
- Xinhua: CNPC will drill a test borehole of up to 11,000 meters.
The China National Petroleum Corporation (CNPC), the government-owned parent company of PetroChina, and Cnooc (OTCPK: CEOHF) has kicked off ultra-deepwater exploratory drilling for oil and gas as the country looks to wean itself of foreign oil.
According to Chinese news agency Xinhua Global Service, CNPC will drill a test borehole of up to 11,000 meters (36,089 feet), the country’s deepest ever, which will help it better understand the Earth’s internal structure better, as well as to test underground drilling techniques.
CNPC’s borehole depth is not far from Qatar’s world record of 12,289 meters (40,318 feet) for a petroleum well depth that was drilled in the Al Shaheen Oil Field in 2008 or Russia’s Kola Superdeep well that reached a depth of 12,262 meters (40,230 feet).
In the oil and gas exploration and production (E&P) industry, deepwater is defined as water depth greater than 1,000 feet while ultra-deepwater is defined as depths greater than 5,000 feet.
Deepwater Boom
But China is not the only country willing to drill to ridiculous depths in the pursuit of energy security.
Deepwater oil and gas production is set to increase by 60% by 2030, to contribute 8% of overall upstream production, according to a new report from Wood Mackenzie, as cited by Rig Zone.
Ultra-deepwater production is set to continue growing at breakneck speed to account for half of all deepwater production by 2030.
Deepwater production remains the fastest-growing upstream oil and gas segment with production expected to hit 10.4 million boe/d in 2022 from just 300,000 barrels of oil equivalent per day (boe/d) in 1990. Wood Mackenzie has predicted that by the end of the decade, that figure will pass 17 million boe/d.
Norway's Aker BP (NYSE:BP) (OTCQX:AKRBF) is the latest oil major to make an ultra-deepwater discovery. At a total depth of 8,168 m, Aker BP says the well is the longest exploration well drilled in offshore Norway. The much bigger than expected oil discovery was made in the Yggdrasil area of the North Sea.
Preliminary estimates indicate a gross recoverable volume of 40 million-90 million barrels of oil equivalent (boe), much higher than the company’s earlier projection of between 18 million and 45 million boe. The discovery will significantly enhance the company’s resource base for the Yggdrasil development, which previously was estimated at 650M gross boe.The oil discovery is located within production licenses 873 and 442: In license 873, with Equinor ASA (NYSE:EQNR) and PGNiG Upstream Norway as partners. The plan for development and operations (PDO) for this project was submitted to Norwegian authorities in December 2022, with production scheduled to start in 2027.
In 2021, U.S. oil and gas major Exxon Mobil (NYSE: XOM) made a big deepwater oil and gas find. Exxon announced that it had made two more discoveries at the Sailfin-1 and Yarrow-1 wells in the Stabroek block offshore Guyana, bringing discoveries on the block to more than 30 since 2015. Exxon revealed that the Sailfin-1 well was drilled in 4,616 feet of water and encountered 312 feet of hydrocarbon-bearing sandstone, while the Yarrow-1 well was drilled in 3,560 feet of water and encountered 75 feet of hydrocarbon-bearing sandstone.
Exxon did not disclose how much crude oil or gas it estimates the new discoveries to contain, but hiked a previous output forecast for the third quarter from older discoveries in the region.
The supermajor has boosted development and production offshore Guyana at a pace that "far exceeds the industry average”. Exxon’s two sanctioned offshore Guyana projects, Liza Phase 1 and Liza Phase 2, are now producing above design capacity and have already achieved an average of nearly 360K bbl/day of oil. The supermajor expects total production from Guyana to cross a million barrels per day by the end of this decade.
Exxon said a third project, Payara, is expected to launch by year-end 2023 while a fourth project, Yellowtail, could kick off operations in 2025.
Exxon is the operator of the Stabroek block where it holds a 45% interest while partners Hess Corp. (NYSE: HES) and Cnooc hold a 30% and 25% interest, respectively. Exxon’s oil and gas production is well below record levels, averaging 3.7M boe/day, nearly 9% below 4.1M boe/day set in 2016.
By Alex KImani for Oilprice.com
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