In the Tarim Basin in south-west Xinjiang, China has overcome the tortuous terrain to build a modern highway in the desert. More than 100 engineers, geomorphologists and botanists, as well as tens of thousands of workers, laboured for four years to build a solid road and protective shields to prevent the sand from shifting under the 522km road. In the process, the experts discovered hundreds of desert stabilising roadbuilding techniques. For example, shelter beds made from reed stalks were planted deep into the sand under the roadbed. The road, completed in 1994, links oilfields in the Taklamakan desert to Korla, an industrial city north of the basin. The remarkable engineering feat highlights China's determination to eXploit the resources found in the heart of the world's second largest desert. For decades, oil specialists had recognised the rich potential deep under the sand, but were deterred from further exploration because of the difficult topography. In the f980s interest was revived, thanks to China's growing appetite for energy. Once sizeable reserves were confirmed, the building of the US$60m highway' was planned to make exploration and drilling easier.
Tarim is one of Xinjiang's three oil basins. The other two are the Jungar Basin in the north and the Turpan-Hami Basin in the west. Tarim is the last to be developed, starting to produce substantial amounts of oil only in recent years. The 560,000 sq km-basin has reserves of 10.76bn tonnes of crude oil, accounting for as much as one-seventh of China's total. Its natural gas reserves of 8.39bn cubic metres are one-quarter of China's total.
"Tarim's gas reserves look most promising, but we will need to think about the market situation and the building of pipelines to transport the gas," cautions Jia Chengzao, chief geologist of Tarim Petroleum Exploration and Development Bureau in Korla, the newly industrialised oil city south of the region's capital, Urumqi.
The bureau, set up in 1989 to co-ordinate exploration and drilling activities in the Tarim Basin, is a subsidiary of the state-owned Lhina National Petroleum Corporation ;CNPC), which is in charge of almost all of Mina's onshore oil development. Jia takes )ride in the streamlined operation of his ;ompany, which has 4,700 regular staff, a traction of the total employed by other old oil-fields like Daqing in Heilongjiang province. ['he bureau prefers to rely on a network of supporting companies to provide project-)ased contract workers, rather than takingthousands more workers onto its payroll.
The confirmation of Tarim's energy resources comes at a time when China's oil production has stagnated while consumption has risen. By the year 2000, China's demand for oil will be 200m tonnes a year, compared with its output of 160m tonnes in 1997. The traditional oilfields of Daqing and Shengli in eastern China, though still accounting for 80 per cent of the nation's annual output, have been denuded by 20m tonnes annually, Chinese officials say. To meet rising demand, China has been importing oil since 1994, as well as securing drilling rights in Kazakhstan and Turkmenistan in central Asia (see page 36).
Beijing is hoping that development of Tarim will reduce its reliance on oil imports, but the hostile geographical environment poses a big challenge to development. The basin covers 560,000 sq km, 60 per cent of which is desert. Sandstorms and extreme temperatures of up to 70 and -30 make drilling even more difficult. "When there is a sand-storm, you can't see anything for miles and miles," says an official of the bureau.
Last year, Jia's bureau pumped out 4.2m tonnes of crude oil, a mere 2.8 per cent of the national total. By 2000, output is expected to have risen to 5m tonnes, says Jia. To date, he adds, there are more than 100 wells pro-Jucing oil, each at a depth of between 3,000 and 5,000 metres. Xinhua reported that the basin has developed 15 oil and gas fields, with 600m tonnes of proven reserves. The most important fields to be developed so far nclude Tai Zhong No. 4 and Yata in the lorthern part of the basin.
Another factor suppressing developmentis the stockpile of domestic oil in the last one or two years in face of cheaper imports. In 1997 China imported 59m tonnes of crude oil, up from 38.5m tonnes a year ago, an increase of 53 per cent. Jia insists that production at Tarim has not been affected by the higher import levels. China Petroleum News, however, reported in March this year that oilfields in Daqing, Jilin and Tarim have closed many oil wells to reduce daily output by more than 10,000 tonnes.
Jia says that Tarim's oil is of superior quality but one problem is poor transportation links in Xinjiang. Currently, the oil is transported by rail to Lanzhou, a petrochemical centre in Gansu. "Local consumption is small. Xinjiang has a small population but has many oilfields," observes Jia. A few pipelines now being built will make delivery much easier. The most important one will be the US$2.3bn pipeline linking Kazakhstan to central China but this will take eight years to complete.
To speed up development of the basin, CNPC has tendered out since 1993 eight blocks to foreign companies to conduct exploration. Exxon is undertaking seismic surveys in three blocks covering 35,000 sq km, Agip has four blocks of 40,000 sq km, while Japan National Oil Corporation has a block of 8,000 sq km. Jia does not reveal details of the co-operation, merely stating that the contracts "conform to international standards". The foreign party bears all the costs of exploration but will recover its costs if oil is found eventually under a revenue-sharing arrangement, he adds.
Jia believes foreign interest in the Tarim Basin has not dwindled despite the onset of lower international oil prices. "Look, the Japanese were still very positive about it when they signed the exploration contract in July last year," he says.