China has been a net oil importer since 1993 and a net crude oil importer since 1996 (BP 2015). These events led to concerns being raised about the potential shortage of domestic oil supply, which in turn led to many studies of China’s future oil production. This section covers a comprehensive review of the literature on China’s conventional oil production, non-conventional oil production, and total oil production, and the implications for China’s oil use.

Conventional oil production

Overall results

Figure 1 presents the results from various production forecasts of China’s conventional oil production, while Table 1 provides additional details of each of these studies. As can be seen in Fig. 1, the different studies present very different results. These studies show a fairly wide range of peak dates for the conventional oil production—from as earlier as 2002 by Yu et al. (2002) to as late as 2037 (Zhang and Jia 2007). The peak production rate forecast could be as low as 140 Mt/year (Tao and Li 2007a) or higher than 236 Mt/year (Zhang and Jia 2007).

Fig. 1 Production forecasts for China’s conventional oil resources. Notes: (1) NGLs have been included; (2) the small vertical steps in the “recommended result” oil production forecast are artefacts of the modelling and are not significant; (3) according to China Energy Statistical Yearbook, 1 kg oil = 41.78 MJ Full size image

Table 1 Summary of production forecasts for China’s conventional oil resources Full size table

Reasons for difference

Many reasons could be responsible for these significant differences, but three are believed to be of most important.

The first is that different values of ultimately recoverable resources (URR) were used in the different studies. Table 1 shows that the lowest URR value is 8.2 Gigatonnes (Gt) according to EWG (2007a), while the highest is 24.6 Gt from Wang and Feng (2016). Wang et al. (2015) used the Multi-Cycle Generalized Weng (MCGW) model to forecast that Chinese oil production will peak at 2025, with a peak production of 195 Mt/year. In a separate study, Wang et al. (2016a) used the same MCGW forecast model but obtained different results (with the peak at 2014, and with peak production at 167 Mt/year). The main reason for the difference is that URR was 19.3 Gt in Wang et al. (2015) and lower, at 12.8 Gt, in Wang et al. (2016a).

URR, which is a key input factor for most of forecast models listed in Table 1, is usually defined as the total quantities that can be recovered from discovered and undiscovered deposits (Wang and Feng 2016). Based on this definition, URR can be divided into two parts: one is recoverable quantities from discovered deposits (this part includes cumulative production, reserves, and reserve growth); the other is the potential recoverable quantities from undiscovered deposits (USGS 2000).

One reason of the difference in URR is that non-conventional resources are sometimes also included in statistics of conventional oil resources (Wang et al. 2013a; 2016a). Other reasons are from the assessment process of URR. It is known that the assessment of these recoverable quantities generally needs to consider two factors, i.e. both economic and technical factors (Wang and Feng 2016). The technical factors are usually taken into the resource assessment carried out by Chinese authorities; however, economic factors may be ignored since the primary purpose of resource assessment in China is to know how much resources are there instead of how much resources can be produced by commercial enterprises (Wang et al. 2013a). In this case, assessment results could easily be overestimated if the economic factors are ignored or insufficiently considered. Studies in the literature have shown that the URR values reported by Chinese authorities (URR values higher than 20 Gt in Table 1 are all from various reports by the authorities) probably overestimate the actual URR due to insufficient consideration of economic conditions (Wang et al. 2013a). We should be very careful before using those very high URRs since Hallock et al. (2014) examined the behaviour of petroleum production from some 40 different countries which tended to follow the low URR estimates far more often than medium or high estimates.

The second main reason for the differences in forecasts in Fig. 1 is in the use of different forecast models. Currently, most studies have used different types of curve-fitting models, such as Verhulst model, growth curve model, Weng model, HCZ model, Hubbert model, and Richard’s model shown in Table 1. According to Wang and Feng (2016), the curve shape of models has considerable impact on forecast results and can be divided into symmetric or asymmetric based on their inflection point.Footnote 1 Asymmetric curves can be further divided into negatively skewed (inflection point > 0.5) and positively skewed shapes (inflection point < 0.5). Generally, the models with a positively skewed curve shape result in lower peak production and lower post-peak decline rate, while models with a negatively skewed curve result in higher peak production and higher post-peak decline rate (Wang and Feng 2016). Brandt (2007) investigated 67 post-peak regions and found that the actual production curves in most regions show a positive skew. Wang et al. (2011) also pointed out the positively skewed curve is better than the symmetric curve for production forecasting. Therefore, it is reasonable to exclude the results estimated by the models with a negatively skewed curve. Luckily, there are no negatively skewed curve-fitting models in Table 1. However, other curve-fitting models with different inflection points may also affect the forecast results. More detailed discussion of the impacts of curve-fitting models on forecast results can be found in Wang and Feng (2016).

The third main reason for the difference in forecasts in Fig. 1 is in the historical production data used. From Table 1, we can see that most forecast models are curve-fitting models, which means the short-term trend of the forecast curve will be affected by historical production data. In China’s oil industry, there are no separate statistics for non-conventional oil production. Therefore, the total historical oil production data are usually seen as the historical conventional oil production by most researchers when they forecast Chinese conventional oil production. That is why many conventional oil forecast curves fit the total historical oil production data well in Fig. 1. The study of Wang et al. (2015) is the first study known to us that breaks out the conventional oil production and non-conventional oil production separately, by collecting the non-conventional oil production data from various sources (See Fig. 1). It can be seen from Table 1 that conventional oil production growth rate becomes significantly lower if non-conventional oil production is excluded from the total oil production. However, at present, it is unrealistic to exclude those estimates [including, for example, Wang and Feng (2016)] that use the total historical production data since they hold a dominant position, and we still lack high-quality conventional oil production data.

Recommended result

Basing policy decisions on such a wide range of forecasts as shown in Fig. 1 is of course difficult. In order to reduce uncertainty, and hence make policy-making somewhat easier, in this paper we have chosen to adopt this “recommended result” approach. We fully accept that reality may turn out different from that indicated by the suggested result, but as indicated elsewhere in this paper there are good reasons for rejecting both the very high and very low forecasts, and here (and in the other cases discussed below) we are reasonably confident that policy decisions formulated at least in part on such “recommended results” are likely to be the most sensible.

In this section, we term the average result of all studies we reviewed as our “recommended result” (see the average conventional oil curve in Fig. 1), except for two types of studies: one is using a URR that does not fully consider the economic factor (i.e. URR values higher than 20 Gt in Table 1); the other is using the negatively skewed curve-fitting models. According to this “recommended result” for China’s conventional oil production, it seems probable that this has peaked in 2014, with a peak production of 170 Mt/year.

Non-conventional oil supply

Now we turn from considering the production of conventional oil, to that of non-conventional oil. Figure 2 and Table 2 summarize the results of studies of China’s non-conventional oil resources. As can be seen so far, we have found only two such studies. Wang et al. (2015) carried out the first quantitative study of China’s long-term non-conventional oil production by using two scenarios. The results under these two scenarios differ significantly. In the high scenario, the total non-conventional oil production will grow considerably in future and reach its peak around 2070, with a peak production of about 350 Mt/year; while in the low scenario, the total non-conventional oil will reach a peak production of about 50 Mt/year much earlier, in 2023 (See Fig. 2). The different URR assumptions are the main reason for this significant difference. As pointed out by Wang et al. (2015), there are no national systematic assessments for URR of each type of China’s non-conventional oil resources. Therefore, URR assumptions in both two scenarios are not specific URR estimates. In the high scenario, the technically recoverable resource (TRR), which is 23.4 Gt, is used as the URR; while “cumulative production plus reserves”, which is only 2.2 Gt, is used as the URR in the low scenario. Based on these assumptions, Wang et al. (2015) suggested that the actual production will almost certainly be much lower than production shown in the high scenario but higher than one shown in the low scenario.

Fig. 2 Production forecasts for China’s non-conventional oil resources Full size image

Table 2 Summary of the results of studies for projecting China’s non-conventional oil resources Full size table

Wang et al. (2016a) further developed the study of Wang et al. (2015) by specifically including the economic factor in their analyses. Based on this Wang et al. (2016a), China’s total non-conventional oil production is more likely to peak at 2021, at a peak production of close to 65 Mt/year. Wang et al. (2016a) thus also indicate that the actual production of non-conventional oil resources in China is likely to be much lower than the results shown in the high scenario, and higher than the low scenario, of Wang et al. (2015).

In this paper, the median projection, i.e. the forecast of Wang et al. (2016a), is taken as the “recommended result” for non-conventional oil.

Total oil supply and its implications for China’s oil use

Based on the above discussion for conventional and non-conventional oil, we can generate a forecast for the likely total oil production in China by combining the above “recommended results” of conventional oil and non-conventional oil. From Fig. 3, we can see that China’s total oil production will likely reach its peak around 2018, with a peak production of about 230 Mt/year.

Fig. 3 Comparison of China’s domestic oil supply and forecast oil demand Full size image

We can then compare this projected total oil production with the forecast for total oil production given in the New Policies Scenario of International Energy Agency (2014). The IEA shows a similar oil production trend. Furthermore, Fig. 3 also indicates the dramatic outcome that results if one compares this paper’s suggested oil production with the historical data, and the IEA’s forecast oil demand. It can be seen from the figure that China’s future oil demand may peak around 2040, with a peak demand of about 780 Mt/year, but before that the oil demand will keep its sharply increasing trend. However, China’s total oil production as indicated in this paper is only likely to be about 170 Mt in 2040. This means that China is expected to see the imbalance between demand and domestic production increasing from 308 Mt/year in 2014 to 610 Mt/year in 2040, with an average annual growth rate of this imbalance of 2.7%. Based on this analysis, oil supply security will remain a serious concern for China. Unless demand for oil falls dramatically, there is no other way to meet this supply gap except by oil imports. In such case, it can be expected that the international oil market will be affected significantly by China’s oil import trend.