Covering an area of 370,000 km2, Ordos Basin is the second biggest sedimentary basin on mainland China. It has been nearly a century since the beginning of oil exploration in Ordos Basin in 1905. The output of oil and gas has been increasing rapidly in the past ten years. In 2003, the total output of natural gas was 5.19 billion m3, and the output of crude oil was 12.55 million tons. Either in terms of oil equivalent or according to crude oil production, Ordos basin ranks the third in China, after Bohai Bay Basin and Songliao Basin.
In 1994-2003, the output of crude oil in Ordos Basin increased from 2.53 million tons to 12.55 million tons, with a net increase of 10.02 million tons. The annual output of natural gas increased from 100 million m3 to 5.19 billion m3, with a net increase of 5 billion m3. The net increases of both oil and natural gas ranked first among the records of all the oil fields in China for the period.
“Low Grade” Resources—Main Resources
Of all the proven reserves, 92% are deposited in layers of low permeability (50md below) or extra-low permeability (5md below). In the past, all the wells used to have oil but did not produce oil; at present, all the wells need to be fractured for production. Poor in reserves, the oil-bearing area per square kilometer only deposits about 500,000 tons of oil reserves. The average output per well is low. For instance, the daily output of each well on average is three tons in Changqing Oil Field, and the daily output of each well on average is only 0.68 tons in Yanchang Oil Field, where the oil geological condition is even worse.
The upper paleozoic reserves take up 76.4% of the proven natural gas reserves. The permeability of sandstone gas reservoir is 0.5~2.0 md. Poor in reserves, on average, the gas-bearing area per square kilometer only deposits 1.3 billion m3 of natural gas reserves. The average daily output of a natural gas well is only about 10,000 m3. The lower Paleozoic reserves take up 23.6%. With higher permeability in carbonate gas reservoirs, the average daily output of a well reaches about 50,000 m3. Poor in reserves, each square kilometer deposits only 70 million m3 of natural gas reserves. Consequently, this carbonate gas reservoir also belongs to “low grade” resources.
The Long Process of Understandings
There are two difficulties in exploiting “low grade” oil and gas resources: one is the requirement for advanced technology; the other is the higher cost with lower profit in comparison with “high grade”
resources. Therefore, the exploitation of oil and gas resources in this area, which has lasted for a century, grew fast only in last decade.
In the beginning, based on their own experience of discovering oil in marine strata, geologists in large foreign oil companies believed that since no high quality source rocks and no good cap rocks existed in Ordos Basin, no gatherings of oil and gas of commercial value would be possible. And that was the source of the opinion that China was short of oil resources. Although Chinese geologists did not agree with this opinion, their understanding of the distribution of oil and gas in Ordos Basin could take place overnight. The exploration focus experienced several shifts from the east to the west and from the north to the south. The main intended reservoir also changed from Triassic to Jurassic, and then to Paleozoic. Various theories on Triassic oil and gas enrichment occurred, such as “the faulted nose theory”, “the fracture theory”,
“the channel sand-body theory” and “the delta sand-body theory”. Many techniques had been adopted to increase the output of oil well, such as cable drilling of open holes for well completion, underground explosion, firing oil reservoirs, casing hole perforation for well completion, large-scale water fracture, sand fracture, injection, synchro-injection and pre-injection. The understanding of potential oil and gas resources in the whole basin enhanced gradually. The oil and natural gas resources were respectively estimated to be 15.3 billion tons and 3.66 trillion m3 in 1984 while 5.41 billion~8.59 billion tons and 4.7 trillion~10.7 trillion m3 in 2004. The oil resources increased by double and a half and natural gas by 1.9 times.
After a long period of exploration, especially in recent ten years, people start to be aware that “low grade” oil and gas resources can be exploited at high speed and with high efficiency for the stress on appropriate management of the oil field and the development of science and technology. At present, the working people in the field are confidently striving to realize the goal of an annual output of 50 million tons (oil and gas equivalent).
Bringing into Play the Initiative of All Companies Involved
Major companies that are exploiting oil and gas in Ordos Basin include Changqing Oil Field Company, Yanchang Oil Mining Company and 14 county-owned drilling and mining companies in Yan’an and Yulin. Changqing Oil Field Company is a large state-owned enterprise under the supervision of PetroChina; Yanchang Oil Field Company and the 14 county-owned drilling and mining companies are local enterprises.
In the past 10 years, the annual output of crude oil in Changqing Oil Field Company increased from 1.96 million tons to 7.02 million tons, and the annual output of natural gas increased from 100 million m3 to 5.19 billion m3. The company paid ??2.43 billion in taxes and made a profit of ??7.31 billion in 2003.
Meanwhile, the annual output of crude oil in Yanchang Oil Mining Company increased from 0.42 million tons to 2.3 million tons while the annual output of crude oil in the 14 local drilling and mining companies increased from 0.144 million tons to 3.23 million tons. Yanchang Oil Mining Company paid ??1.095 billion in taxes and made a profit of ??1.054 billion. And those 14 companies paid ??0.895 billion in taxes and made a profit of ??0.98 billion. As a whole, Yanchang Oil Mining Company and the 14 drilling and mining companies ranked on the list of large and medium sized oil enterprises.
The annual output of crude oil of the companies above has the following characteristics:
(1)The annual output of crude oil enters into a period of rise at high speed since 1994.
Since 1993, the deviation of the sale price of crude oil from its value has gradually been weakened. The reasonable price of oil has encouraged and accelerated the production of crude oil.
Changqing Oil Field Company has tackled those key problems in science and technology after 10 years of hard work since the discovery of Ansai Triassic Oil Field. At present, the technology to explore reservoirs of low permeability and of extra low permeability has become mature. Because of the reasonably high price of oil, the output of Triassic Oil Field increases rapidly and accounts for 5/7 of the annual output in 2003 Thus, Triassic Oil Field plays a leading part in producing crude oil.
(2) Yanchang Oil field Company and the 14 drilling and mining companies entered the accelerating period one after another in 1999 or in 2003.
Some subsidiary units were separated from such giant oil companies as PetroChina and Sinopec and formed a large market for technical service. Yanchang Oil field Company and the 14 drilling and mining companies seized the opportunity. They made full use of the market mechanism and produced oil of high quality in large quantity.
Although having no drilling teams, Yanchang Oil Mining Company managed exploring 2,362 wells last year by hiring other teams. Yanchang Oil Mining Company hired a team from Shengli Oil Company to drill a horizon well and to cement the well, and a team from Sichuan Oil Company for logging and perforating. Yanchang also hired people from Daqing Oil Company to perform the first fracturing and those from Changqing Oil Company to do the second fracturing. At present, the 14 drilling and mining companies are in the similar situation.
From the history of the world oil industry, we can easily draw the conclusion that integrating large, medium and small oil companies is an efficient way to utilize oil and gas resources, especially “low grade” resources. After over half a century of large-scale development, the oil industry in China has gained rich experience, numerous talent and strong working ability. In addition, the reform and opening in last 20 years leads to the formation of a huge market for capital and technology. At present, China is in urgent demand for oil and gas, but the international oil price remains high. Thus we should integrate large, medium and small oil companies to accelerate the development of the oil industry. The prerequisites of the integration are the state’s strict practice of “governing the field by the law” and the proper and efficient guide and management of governments at all levels.
Prospering “Multi-well with low productivity”
The oil and gas resources in China bear the characteristics of large amount, small per capita and few “high grade” resources (namely resources of abundance, high productivity, large scales and good quality). Therefore, making full use of “low grade” oil and gas resources is of strategic significance to national energy safety. The practice in Ordos Basin proves that large-scale, high-speed and highly efficient exploitation and utilization of “low grade” resources are possible and practical.
For the sake of energy safety and social benefit, we can learn from the United States that we should stress the development of local resources while continuously expanding the development of overseas oil resources. The annual output of oil in the United States reached 100 million tons in 1920s, and continued to increase thereafter. In 1970 the annual output reached about 500 million tons. Since then, it declined gradually. The present output is about 300 million tons, roughly equal to double the annual output in China in the corresponding period. The average daily output per well in the United States is very low with the maximum of 2.5 tons in 1970 but only 1.5 tons at present. For example, in 1999, of 546,000 oil wells, 422,000 wells were of low productivity. On average, the daily output per well was less than 0.5 tons. Obviously, the United States is prosperous in oil production, but is founded upon “low grade” resources. It practices the policy of
“having multi-wells with low productivity”.
“Low grade” resources take up a large proportion of the total oil resources both in China and in the United States; therefore, China and the United States must share certain similarities in measures taken to exploit native resources. However, as China’s petroleum industry has a shorter history and the working level is lower, to endeavor both to discover “high grade” resources and to exploit “low grade” reservoirs may be fit for the present situation in China. Long-term prosperity of “having multi-wells with low productivity”
may be the only way for the sustainable development of the upstream oil industry in China. The United States has developed its oil industry by this way, and China’s Ordos Basin is following the same path.
(Translated by Huang Xingwen)