China will end 2025 with the strongest domestic crude oil production in modern history and conclude its seven-year action plan (2019-2025) with measurable gains. National production has risen from 3.8 million barrels per day in 2020 to an average of 4.3 million barrels per day in 2025, an increase of about 12%, driven by accelerated drilling activity, rising unconventional production and the most significant restructuring of the upstream industry in decades. The expansion reflects Beijing’s strategic goal of strengthening energy security through domestic supply as overall demand continues to grow.
The current reshaping of China’s upstream began in 2020, when the government replaced the administrative allocation of mining and hydrocarbon rights with a market-based bidding and auction framework, later codified in the 2025 Mineral Resources Law. The reform marks a break from traditional state allocation practices and opens the door for private Chinese domestic companies to participate in exploration acreage alongside state champions. In 2025, the Ministry of Natural Resources held six licensing rounds involving 23 blocks, the most extensive land release to date to non-state operators in China.
These structural changes and increasing investment capital have had clear regional impacts. Tianjin’s production increased from 632,000 barrels/day in 2020 to 785,000 barrels/day in 2025, the largest increase in the region; while Xinjiang’s production increased from 571,000 barrels/day to 649,000 barrels/day as testing of deep and tight oil reservoirs expanded. Heilongjiang production fell slightly, from 604,000 barrels per day to 579,000 barrels per day, highlighting the maturity of oil fields left over from the Daqing era and the pressure to replace declining production.
Although the policy is open to private enterprises, the industry is still dominated by state-owned enterprises. PetroChina is the largest oil producer, with an average production of 2.5 million barrels per day in 2025 and a storage capacity of approximately 1.2 million kilometers2 As the company increases its efforts in unconventional exploration, the onshore exploration area spans the Sichuan, Tarim, Ordos, Junggar, Songliao and Qaidam basins, covering conventional, tight and shale development.
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CNOOC (China National Offshore Oil Corporation) has performed well in terms of production growth, expanding from 690,000 barrels/day in 2020 to approximately 900,000 barrels/day in 2025, supported by 650,000 kilometers2The offshore area spanning the Bohai Bay and the South China Sea. Although CNOOC has historically been a predominantly offshore producer, it has begun to expand its onshore operations as new businesses emerge and the company positions itself against resource concentration risks. Meanwhile, another Chinese oil and gas state-owned giant, Sinopec (600,000 bpd in 2025), maintains substantial upstream weight in the Sichuan, Tarim, Northern Jiangsu and onshore Bohai basins, supported by approximately 700,000 km2 land area and 100,000 km2 offshore, consolidating its role in the oil and gas corridors in the country’s southwest and far west.
China’s accelerated exploration has begun to yield tangible results as a seven-year plan pushes state producers to expand their search for domestic reserves. Bozhong 26-6, discovered by CNOOC in 2023, is a shallow water reservoir in the Bohai Sea. It happens to be the largest metamorphic mountain oil and gas reservoir in the world, with an estimated area of 200 million cubic meters.3 Oil and gas reserves in place have moved from the discovery stage to first production, with completion in early 2025 – an unusually rapid transition for a frontier reservoir. PetroChina’s unconventional plans proved equally significant. In late September 2025, the company confirmed that the shale oil reserves in the Gulong area of the Songliao Basin were 1.15 billion barrels, and the peak production was expected to be 130,000 to 140,000 barrels per day. PetroChina reported as early as early December that the annual production of the block had exceeded 1 million tons. In the Xinjiang Junggar Basin, the drilling depth reaches 9,056 meters, which is the deepest well in the basin and the second deepest well onshore in China. Sinopec has also entered new resource areas with the Qilunye No. 1 well in the Sichuan Basin, which tested commercial shale oil and gas at a depth of 2,000 meters. Official media said its crude oil potential was 100 million tons, indicating for the first time that southwest China has a commercially viable crude oil reserve base.
Just as China’s oil and gas recovery is accelerating, foreign investors are finding that the door is quietly closing. ConocoPhillips, which has been active in China since the 1980s, now retains only a 49% stake in the Penglai oil field through its Chinese subsidiary after transferring operating rights to CNOOC in 2014, which represents legacy participation rather than full operations. Chevron once held a position in multiple offshore production sharing contracts but has now given up its Bohai Bay and South China Sea blocks and retains only an interest in the Northeast Sichuan sour gas sharing contract through its subsidiary, although industry reports describe the commissioning of the final fields in June 2025 as “the end of Chevron’s legacy in the project”. While foreign companies have publicly expressed interest in participating in new exploration opportunities in China, Beijing appears largely unmoved by the appeal of foreign capital or technology. No acquisition deals have been reported, underscoring the geopolitical tensions and tight restrictions on foreign ownership in strategic industries that continue to limit international companies’ access to China’s upstream industries.
The expansion of domestic production, coupled with the opening of acreage to Chinese private companies, may put pressure on import volumes; but the data tells a different story. Since 2023, China’s seaborne crude oil imports have remained steady at 10.5 million bpd (plus 850,000 bpd of Russian oil via pipeline), although domestic production has climbed from 4 million bpd to 4.3 million bpd, with imports always accounting for around 70-75% of total consumption. Most of these barrels come from Saudi Arabia, Russia, Iraq, Brazil and Iran, which supply grades tailored to the needs of refineries off China’s coast.
Over the past two decades, China’s largest refineries have been designed, expanded or upgraded to process specific imported crude grades – particularly medium and heavy sour crudes – that are more economical in producing fuels and petrochemical feedstocks than China’s many lighter, higher-cost domestic crudes. With consumption expected to rise and refinery configurations structurally aligned with foreign grades, imports remain the basis of supply. New discoveries (whether unconventional onshore or in shale, shallow or deepwater) will require longer development cycles to make a meaningful contribution, suggesting that domestic gains will moderate but will not replace import dependence. China is producing more oil domestically, but the architecture of its refining system ensures the country must continue to buy most of its oil from abroad.
China will enter 2026 with a stronger domestic production base, more diverse operators, and momentum in unconventional and offshore exploration. CNOOC’s drilling activity in the Bohai Bay shows no signs of slowing down, and after three years of steady growth, the company may add another 40,000 barrels per day in 2026. PetroChina remains willing to meet the targets set by Beijing, but its own reports highlight the troubling trade-offs behind the acceleration: Its resource base has shrunk by a net 200 million barrels over the past three years, suggesting that production is outpacing reserves additions. The faster China accelerates its push upstream, the faster and more dramatic its inevitable decline will be.
But for now, the trend remains upward. China has solidified its position as the world’s sixth-largest oil producer, with output set to increase by about 100,000 barrels per day year-on-year by 2025, and a nationwide increase of at least 70,000 barrels per day seems within reach thanks to ambitious drilling targets by CNOOC and PetroChina. Whether it is a lasting transformation or a prelude to a rapid slowdown, China’s upstream renaissance is entering a stage where its resilience and growth potential are exposed, or its ceiling is exposed.
Author: Natalia Katona, Oilprice.com
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