Exploring energy cooperation opportunities for energy security and energy transition

CNPC ETRI launches the Oil and Gas Industry Development Report in Dubai

On May 27, 2024, CNPC Economics & Technology Research Institute (or “ETRI”, a China Top Think Tank), launched the report Oil and Gas Industry Development in Dubai. Centering on the topic of “Adjustments in the Oil and Gas Industry”, ETRI provided its insights into the development trends in the oil and gas industry and exploring investment and cooperation opportunities amid industry adjustment. According to the Report, clean energy investment has grown rapidly, global share of fossil fuels fell below 80% for the first time in 2023, and sustained rebound of China’s economy has shored up the country’s demand growth for oil and gas. Besides, energy transition is advancing at a faster pace, and China’s refined oil consumption may peak in 2024.

The launch ceremony was hosted by ETRI and co-organized by CNPC Middle East Company (“CNPC Middle East”).  “The Report has become a benchmark report in the energy industry”, said CHEN XINRONG, president of CNPC Middle East, at the launch ceremony. “Its launch to the global in Dubai is of great significance to further strengthening international exchanges and cooperation in the energy industry, promoting the construction of a community of shared interests in energy cooperation, and enhancing the resilience of the energy supply system. It is also important for accelerating the recovery and growth of the world economy,” CHEN added. 

With a history of 60 years, ETRI has released the Report annually over the past 16 years, and appeared in Dubai for the first time abroad, attracting nearly 100 representatives from relevant companies and presses.

At the launch ceremony, WU Mouyuan, vice president of ETRI and deputy editor of the Report, shared his observation on the oil and gas industry on behalf of the editorial team. The global energy industry has entered a period of profound changes and adjustment. The year 2023 witnessed improvements in energy security and falls in energy prices globally. Oil prices dropped by close to 20%, natural gas and coal prices by more than 50%, and lithium carbonate and photovoltaic module prices by more than 50%, which played a critical role in sustaining growth in the global economy, especially in curbing inflation. Energy transition accelerated amid competition, and the proportion of fossil fuel consumption fell below 80% for the first time.

According to the Report, demand in the oil and gas markets became more concentrated, and prices fluctuated and fell from high levels. Brent crude futures averaged $82.17/bbl in 2023, down 17% year-on-year; global oil demand is expected to grow by 950,000 bbl/d year-on-year to 102.7 million bbl/d in 2024, and Brent crude oil is projected to range between $75-80/bbl. Gas prices fell back from historic highs to pre-Ukraine crisis levels in 2023, but European and Asian gas prices hovered nearing historic highs. In 2024, the global natural gas demand is projected to grow by 1.5% at 4.02 tcm, and the Asia-Pacific will be the engine, Middle East keep a slight increase, while Europe continue to decline.

Energy transition will bring more investment opportunities. According to the Report, great investment and cooperation opportunities will be generated in the energy transition highlighted with green and low-carbon development, which presents four characteristics: cleaner fossil fuels, scale-up development of clean energy, integration of energy systems, and re-electrification of end-use energy. During the transition, failure to advance clean energy development before a cut-back in conventional energy would result in unstable energy supplies, under-investment in fossil fuels, and less resilience in the energy system. It is worth noting that major IOCs have re-enforced their upstream businesses, and may make M&As a new trend even outside of oil and gas assets.

According to the Report, China’s energy security capacity enhanced continuously. In 2023, China’s total energy supply was approximately 4.894 billion tons of standard coal, with self-sufficiency rate of 85.6%, an increase of 7.2 percentage points from 2016. The Report shows significant growth in oil and gas consumption from continued positive economic development in China. In 2023, China’s crude oil output stood at 200 million tons, a six-year growth in a row; natural gas output increased to 235.3 bcm by more than 10 bcm for seven years in row. Oil consumption grew rapidly to a record high of 756 million tons, up 11.5% year-on-year; refined oil consumption grew by 9.5% to 399 million tons, approaching the 2019 level. Natural gas consumption rebounded to 391.7 bcm, an increase of 6.6% year-on-year. Continued recovery of China’s economy have shored up the demand for oil. In 2024, China’s oil demand is expected to rise steadily to 764 million tons, up 1% year-on-year. The clean, low-carbon, flexible and efficient natural gas will be crucial to China’s comprehensive green transformation of economic and social development, by replacing highly polluting fuels and supporting scale-up of new energies.

In 2023, the proportion of non-fossil fuels in China’s primary energy consumption structure rose to 17.7%. The installed renewable capacity was 1.43 billion kW, accounting for more than 50% of the country’s total capacity for the first time. EVs recorded a market penetration rate as high as 31.6%. As the electrification substitution in end-use energy sectors accelerates and the share of new energy sources in the energy consumption structure continues to rise, China’s demand for refined oil may peak before 2025. In 2023, China’s growth of refining capacity slowed to 936 million t/y with the operating rate of 79.1%. Looking ahead, China’s oil consumption will shift from fuel-based to feedstock-based, and new petrochemical materials will be a key area for energy investment. The demand for new chemical materials in new energies will maintain rapid growth, great opportunities for UHMWPE, carbon fiber, EVA, and POE etc.

According to the Report, unique transformation models for oil and energy companies are taking shape, with integrated development of oil and gas with new energy sources. In the oil and gas industry, a new business model is being formed by combining the mutually complementary oil and gas with new energy sources. Centering on clean and low-carbon energy production and supply, such business model aims to build a “six-in-one” energy system providing clean oil, natural gas, geothermal energy, clean power, hydrogen and CCUS, as well as integrated smart energy solutions. In 2023, China’s oil and gas companies accelerated their pace in promoting the green transition, and “four changes” took place by turning oilfields into geothermal fields, green electricity fields, green hydrogen fields, and carbon storage fields.

At the launch ceremony, the editorial team of the Report also exchanged views with participants on some hot issues.