In 2017, the global economy accelerated its growth, and the recovery remained steady. Global oil and gas supply and demand were broadly balanced, and international crude oil prices rose steadily. In China, investment in oil and gas exploration and development, as well as physical work volume, bottomed out and began to rebound. Significant progress was made in oil and gas exploration, with national crude oil production declining slightly while natural gas production grew relatively rapidly.

　　Oil and gas resource outlook: International crude oil prices are steadily rebounding, the market supply-demand balance is returning to equilibrium, and exploration and development activities are picking up.

　　First, international crude oil prices are steadily rebounding, and the supply-demand balance in the oil and gas market is once again tilting toward equilibrium.

　　Influenced by factors such as the strengthening global economic growth, rising oil demand, OPEC’s production cuts, and the geopolitical situation in the Middle East, international crude oil prices have been steadily recovering. The average spot prices for light sweet crude oil (WTI) and Brent crude oil at the New York Mercantile Exchange (NYMEX) for the year were $50.89 per barrel and $55.75 per barrel, respectively, representing year-on-year increases of 17.8% and 27.5%. Since the second half of 2017, international crude oil prices have shown a rapid upward trend.

　　In 2017, the production cuts under the OPEC agreement led to a slowdown in the growth rate of global crude oil supply. According to data from the U.S. Energy Information Administration (EIA), global oil demand for the year totaled 98.46 million barrels per day, while supply reached 98.30 million barrels per day, bringing global crude oil supply and demand back into balance—and this balance is expected to persist through 2018.

　　Second, oil and gas exploration and development activities are rebounding, with upstream investment leaning toward short-term, high-return projects.

　　According to IHS statistics, global exploration and development investment reached US$382 billion in 2017, representing an 8% year-on-year increase. In North America, unconventional oil and gas development has been particularly active, with a rapid rise in the number of oil and gas drilling rigs. According to data from Baker Hughes, the average number of active drilling rigs worldwide in 2017 was 2,029, up 27.4% from the previous year. In the United States, the average number of active drilling rigs was 875, representing a year-on-year increase of 71.6%. Driven by this trend, U.S. shale gas production in 2017 reached 472.1 billion cubic meters, an increase of 29.3 billion cubic meters over the previous year. U.S. tight oil production totaled 237.59 million tons, up 20.22 million tons from the previous year. The global oil and gas M&A market showed a clear recovery, with completed deal value approaching US$170 billion, a 13% increase year-on-year. North America remains the most active region for asset transactions.

　　International oil companies are shifting their investment strategies, directing their limited capital expenditures toward short-term, high-yield, and highly profitable projects and regions. For example, BP has announced its intention to focus on mature oilfield projects in low-cost basins to accelerate capital returns; in 2017, ExxonMobil allocated 34% of its upstream spending to short-term, high-return projects; and Chevron has also explicitly stated that it will prioritize investments in short-term, high-return projects.

　　Third, oil and gas reserves and production remained stable, while oil and gas discoveries hit a new low in recent years.

　　According to statistics from the U.S. magazine "Oil & Gas Journal," global proven oil reserves stand at 226.28 billion tons, up 0.4% year-on-year, with a reserve-to-production ratio of 57 years. Global proven natural gas reserves amount to 196.8 trillion cubic meters, an increase of 0.7% over the previous year, with a reserve-to-production ratio of 53 years.

　　Newly discovered oil reserves have hit a new low in recent years. According to a report by Norwegian oil and gas consultancy Rystad Energy, global newly discovered oil and gas reserves in 2017 totaled less than 7 billion barrels of oil equivalent—just 6.7 billion barrels of oil equivalent—marking the lowest level in a decade. Major discoveries came primarily from offshore projects in Africa, Latin America, and the Asia-Pacific region.

　　Global oil production remained stable while natural gas production increased. Global oil production totaled approximately 4.36 billion tons, unchanged from 2016 levels. Among these, North America and Africa saw year-on-year increases, whereas Latin America and the Asia-Pacific region experienced year-on-year declines. Natural gas production rose significantly, reaching 3.7 trillion cubic meters—a 2.6% increase over the previous year. The primary contributors to this growth were regions such as the Asia-Pacific and Africa.

　　Fourth, major oil-producing countries are adjusting their oil and gas management policies under the new landscape.

　　OPEC countries and non-OPEC oil-producing nations have reached an agreement: starting January 1, 2017, OPEC countries will cut their daily oil production by 1.2 million barrels compared to their average daily output in October 2016, while non-OPEC oil-producing nations will reduce their daily oil production by 558,000 barrels. In September 2017, OPEC countries and major oil producers such as Russia agreed to extend the oil production cuts until the end of 2018. In addition, the United States, France, Venezuela, and other countries have introduced new energy policies and measures.

　　The 2017 situation of China’s oil and gas resources: crude oil production declined slightly, while natural gas production grew rapidly, and both crude oil and natural gas consumption continued to rise.

　　First, investment in oil and gas exploration and production has surged significantly, crude oil output has declined slightly, while natural gas production has grown rapidly.

　　Investment in oil and gas exploration and production showed a significant rebound: In 2017, nationwide investment in oil and gas exploration (including petroleum, natural gas, shale gas, coalbed methane, and natural gas hydrates) reached 57.8 billion yuan, while investment in oil and gas production totaled 156.3 billion yuan—increases of 11% and 17%, respectively, over the previous year. The number of exploration wells drilled rose to 2,759, and the number of development wells increased to 21,031, representing year-on-year growth of 2% and 37%, respectively. The area covered by 2D seismic surveys reached 36,000 square kilometers, and 3D seismic surveys covered 30,000 kilometers—down 31% and up 13%, respectively, compared to the previous year.

　　Affected by factors such as low international crude oil prices and a slow recovery, the annual crude oil production reached 192 million tons, a year-on-year decrease of 4%, with the decline narrowing by 2.9 percentage points. Since 2016, crude oil production has been below 200 million tons for two consecutive years.

　　Natural gas production is growing rapidly. In 2017, conventional natural gas production reached 133.4 billion cubic meters, an increase of 8.3% year-on-year; shale gas production totaled 9 billion cubic meters, up 14.2% from the previous year; and coalbed methane production came in at 4.7 billion cubic meters, representing a 5% increase over the previous year.

　　Second, significant achievements have been made in oil and gas exploration. Major progress has been achieved in shale gas exploration and development, and a major breakthrough has been attained in the pilot extraction of natural gas hydrates.

　　Conventional oil and gas exploration has yielded numerous significant achievements in basins including Ordos, Tarim, Junggar, Sichuan, Bohai Bay, and the Pearl River Estuary. In the Nanliang-Huachi area and Jiyuan area of the Ordos Basin, newly discovered geological reserves of oil have both exceeded 100 million tons; substantial progress has been made in natural gas exploration in the southern and western parts of Sulige. In the Tarim Basin, breakthroughs have been achieved in the exploration of Ordovician oil along the Shunbei No. 5 main fault zone, while a new exploration frontier for Jurassic-age reservoirs has been opened up in the northern Kuqa structural belt. In the Mahu Sag of the Junggar Basin, multiple wells—including Well Mahu 8, Well Mahu 013, and Well Ke 017—on the Beiwu Slope of Zhongguai have each produced over 100 tons of oil per day, establishing this as another major new succession layer for the Mahu region. In the Sichuan Basin, the Xingtan 1 well in the Leikoupo Formation has made an important discovery during risk exploration, opening up a new front for natural gas exploration in western Sichuan. In the high-steep fold belt of eastern Sichuan, the Tailai 6 well in the Bashi Temple syncline has encountered industrial gas flows, marking a breakthrough in the exploration of Permian dolomite formations in southeastern Sichuan.

　　Significant progress has been made in the exploration and development of shale gas in the Sichuan Basin and its surrounding areas. The Fuling shale gas field in Chongqing has added 220.2 billion cubic meters of proven geological reserves in the Pingqiao and Jiangdong blocks; the Wei 202 and 204 blocks have seen an additional 156.5 billion cubic meters of proven shale gas reserves. In the Weiyuan block, well Weiye 23-1HF has successfully tested a daily shale gas production rate of 260,000 cubic meters. Deep-fracturing technology at depths ranging from 3,500 to 4,000 meters has achieved breakthroughs in the Weiyuan, Jiangdong, and Pingqiao regions. In Yichang, Hubei Province, well Eyiye 1HF in the Cambrian Shuijintuo Formation has achieved a daily shale gas production rate of 60,000 cubic meters following fracturing and testing, marking a major breakthrough in the exploration of shale gas in the Central Yangtze region.

　　A major breakthrough has been achieved in the pilot extraction of natural gas hydrates. As of July 9, 2017, the China Geological Survey had conducted a continuous pilot extraction of natural gas hydrates in the Shenhu area of the South China Sea for 60 days, with cumulative gas production exceeding 300,000 cubic meters. This marks the world’s first successful and safe, controllable extraction of silt-sand-type natural gas hydrates, representing a historic breakthrough.

　　Third, consumption of crude oil and natural gas continues to grow, while imports of oil and gas are rapidly increasing, pushing foreign dependency to yet another record high.

　　In 2017, China’s oil consumption growth rebounded, with apparent crude oil consumption reaching 608 million tons—exceeding 600 million tons for the first time. China’s crude oil imports surpassed those of the United States, making it the world’s largest crude oil importer for the first time. Apparent natural gas consumption totaled 237.2 billion cubic meters, and liquefied natural gas (LNG) imports exceeded those of South Korea, positioning China as the world’s second-largest LNG importer, behind only Japan.

　　Annual imports totaled 420 million tons, surpassing 400 million tons for the first time, representing a year-on-year increase of 10.1%. The value of imports reached US$162.3 billion (RMB 1.10 trillion), up 42.7% from the previous year. The average import price was US$52.97 per barrel, an increase of 29.8%. China’s external dependence on crude oil stood at 68.4%.

　　Affected by factors such as the rebound in natural gas prices and environmental protection policies, downstream users of natural gas have seen a sharp increase in consumption, leading to an overall tight supply-demand balance and the emergence of gas shortages. Throughout the year, imports totaled 93.3 billion cubic meters, representing a year-on-year increase of 26.9%. The value of these imports reached US$23.3 billion (RMB 157.4 billion), up 44.5% from the previous year. The country’s external dependence on natural gas stood at 37.9%.

　　The volume of piped gas imports grew steadily, while LNG imports surged at a rapid pace, eventually surpassing piped gas imports. Throughout the year, piped gas imports totaled 41.4 billion cubic meters, up 22.7% year-on-year, with import value reaching US$8.5 billion (RMB 57.7 billion), an increase of 33.8% over the previous year. The average import price was RMB 1.4 per cubic meter, roughly unchanged from the previous year. LNG imports reached 51.9 billion cubic meters (38.13 million tons), up 34.8% year-on-year, with import value totaling US$14.8 billion (RMB 99.6 billion), an increase of 50.2% over the previous year. The average import price for LNG was RMB 1.92 per cubic meter (RMB 2,613 per ton), up 23.6% year-on-year.

　　Fourth, reforms in the exploration and development of oil and gas resources are progressing smoothly. In May 2017, the CPC Central Committee and the State Council issued the "Several Opinions on Deepening the Reform of the Oil and Gas System." Regarding the transfer of oil and gas blocks, exploration rights for shale gas blocks in Guizhou, coalbed methane blocks in Shanxi, and oil and gas exploration blocks in Xinjiang were transferred through three different methods: auction, bidding, and public listing. Additionally, PetroChina and Sinopec have initiated internal transfers of mineral rights. Furthermore, 20 government departments—including the National Development and Reform Commission, the People's Bank of China, the Ministry of Finance, and the Ministry of Natural Resources—jointly signed the "Memorandum of Cooperation on Joint Punishment of Seriously Violating and Dishonest Entities in the Oil and Gas Industry," under which multiple departments will impose joint sanctions on entities in the oil and gas industry that have committed serious violations and demonstrated dishonest behavior.

　　Moreover, China has made some significant progress in its overseas oil and gas cooperation, such as the signing of a major energy deal between China and the U.S., and important advances in the construction of natural gas and crude oil pipelines between China and Kazakhstan, as well as between China and Russia.

　　2018 Outlook: Crude oil demand will continue to grow, and China’s oil and gas investment will maintain an upward trend.

　　According to the World Bank’s “Global Economic Prospects” released in January 2018, global economic growth is projected to pick up slightly in 2018, reaching 3.1%. Crude oil demand is expected to continue growing, and the global supply-demand balance for oil and gas will remain broadly stable. According to data from the International Energy Agency (IEA), global crude oil demand in 2018 was 99.1 million barrels per day, an increase of 1.3 million barrels per day compared to 2017. International crude oil prices are expected to rise overall, with Brent crude priced at around $60–$70 per barrel and WTI at about $55–$65 per barrel.

　　Driven by factors such as rising international oil prices and reforms in the operational mechanisms of oil companies, China’s oil and gas investment and work volume are expected to maintain a growth trend in 2018. Crude oil production is likely to halt its decline and begin to rebound, remaining roughly flat compared to the previous year. Natural gas production could reach 150 billion cubic meters, representing a 10% increase over the previous year, while shale gas production is set to surpass 10 billion cubic meters. China’s dependence on foreign sources for oil and gas will continue to rise, with crude oil import dependency approaching 70% and natural gas import dependency nearing 40%. It is crucial to focus on slowing the rapid increase in crude oil import dependency and addressing the seasonal imbalances between supply and demand for natural gas.

　　(Author affiliations: Strategic Research Center for Oil and Gas Resources, Ministry of Natural Resources; Jing Dongsheng, Wang Yuyan, Li Fubing, Bai Yu)