China’s Oil Production Peaks at 4.32 Million BPD, Facing Economic Constraints

China, the world’s leading oil importer, has achieved a significant milestone in its energy sector, reaching a record oil production of 4.32 million barrels per day (bpd) last year. This achievement is the culmination of a seven-year initiative aimed at enhancing domestic production through aggressive drilling in aging fields, offshore expansion, and the early stages of shale oil extraction. However, experts warn that China may be nearing the economic limits of its production capabilities, as growth in offshore drilling begins to slow and the exploitation of unconventional resources becomes increasingly challenging.

Economic Constraints on Production Growth

Industry analysts predict that China’s oil output will plateau just below last year’s record for the next decade. This plateau is viewed as a crucial stabilizer for national security, particularly for basic manufacturing and military requirements. The Chinese government’s plan for 2026-2030, announced on March 5, aims to maintain production at 4 million bpd. This indicates a continued reliance on imports, which amounted to 11.55 million bpd last year, even as domestic oil demand peaks due to the electrification of transportation and a slowdown in economic growth.

Zhu Weilin, a professor at Tongji University and former chief geologist at China National Offshore Oil Company (CNOOC), noted that the three major state-owned oil companies are striving to sustain production levels to mitigate unpredictable supply disruptions. The ongoing conflict in the Middle East has further emphasized the need for domestic production, as it has disrupted crude exports from a region that supplies half of China’s oil imports.

Technological Innovations in Oil Recovery

China first reached the 4 million bpd production mark in 2010, coinciding with a surge in demand. The Daqing oil field, operational for 66 years and once championed by Mao Zedong as a symbol of China’s industrialization, remains vital, producing approximately 600,000 bpd. Engineers at Daqing employ advanced techniques such as “tertiary recovery,” which involves injecting chemicals into oil reservoirs to maximize extraction. According to experts from China National Petroleum Corporation (CNPC), these methods can increase output by 20% compared to traditional secondary recovery techniques that utilize water injection.

Oscar Abbink, the upstream technology director at S&P Global Energy, highlighted the unparalleled scale of polymer flooding in the Daqing oil field, noting that the method has been highly optimized. The expertise developed over the past 25 years in employing chemical and thermal injection techniques has enabled CNPC’s drilling teams to secure contracts in countries like Saudi Arabia and Iraq.

Cheng Jiecheng, Daqing’s chief expert on tertiary recovery, stated that chemical-based technologies could potentially unlock an additional 7.3 billion barrels of reserves from China’s older fields. Over the past two decades, tertiary recovery has contributed approximately 161 million barrels annually to CNPC’s output, accounting for about 10% of the nation’s total production. This figure is expected to rise to 219 million barrels by 2035, according to industry estimates.

The Seven-Year Action Plan

In response to a decline in production below 4 million bpd in 2016, Beijing initiated a seven-year action plan in 2018, mobilizing state-owned enterprises to accelerate drilling efforts. This initiative includes exploring challenging terrains, such as depths of 10,000 meters beneath the Gobi Desert, and enhancing offshore production capabilities. CNOOC has been at the forefront of this growth, with projects like Bozhong 19-6 and Bozhong 26-6 in Bohai Bay, as well as the deepwater Kaipingnan field in the South China Sea.

Bohai Bay has emerged as China’s most productive region, with crude output reaching 740,000 bpd in 2025, a 55% increase from a decade earlier. CNOOC reported that Bohai accounted for 40% of national output growth between 2021 and 2025.

Challenges in Shale Oil Development

Since 2010, Chinese state firms have intensified drilling in shale formations using hydraulic fracturing and horizontal drilling techniques. However, the country’s shale oil is primarily found in lacustrine shale, which is less commercially viable than the marine shale that has driven production booms in North America. Despite these challenges, Chinese companies managed to produce nearly 164,000 bpd of shale oil last year, marking a 30% increase from 2024, with pilot projects in regions like Qingcheng, Gulong, and Jimsar.

Despite advancements, the commercial viability of China’s shale oil remains questionable due to low single-well output and high production costs. Full-cycle costs range between $45 and $90 per barrel, which is higher and more variable compared to the U.S. However, projects like Jimsar have managed to reduce costs to around $45 through improved drilling techniques.

Rystad Energy forecasts that shale oil production could double to 120 million barrels annually by 2035, representing 8% of China’s total output, as PetroChina and Sinopec develop new pilot projects.

Future Outlook and Strategic Stockpiling

Energy research firm Wood Mackenzie anticipates that China’s oil output will remain relatively flat through 2026 before gradually declining. Rystad expects production growth to slow over the next five years, peaking between 2028 and 2030 at approximately 4.36 million bpd. In light of these projections, China is actively increasing its strategic stockpiling to create a buffer against potential supply disruptions.

Matthew Andre, an associate research director at S&P Global Energy, emphasized that a peak in production would signify the limits of policy-driven supply growth and reinforce China’s long-term dependence on global oil markets, even as domestic demand growth slows.

According to publicly available www.zawya.com reporting, the developments in China’s oil production landscape reflect broader implications for energy security and economic stability in the region.

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