Oil demand set to fall as country speeds up building of renewable power plants

China's oil giants are planning to ramp up green energy production and use more sustainable, low-carbon methods in oil production to reach carbon neutrality, as the future of the country's energy sector is likely to lie in greener alternatives.

With oil demand set to fall due to the country's decarbonization drive, China National Petroleum Corp, the country's largest oil and gas producer by annual output, aims to further optimize its production structure while diversifying its business in the years to come to meet the country's growing demand for clean energy.

The company has been stepping up forays into wind and solar energy, while gearing up in the integrative development of carbon capture, utilization and storage to help reduce emissions from the existing fossil fuel sector. CCUS and green power are expected to play key roles in both developing and developed countries in the years to come.

In addition to building wind and photovoltaic energy facilities in China's Gobi Desert, in response to government ambitions to speed up the construction of renewable power generation facilities in the Gobi and other arid regions to further take advantage of its abundant wind and solar resources, the company has also come up with various distributed solar and wind facilities at its oilfields, scattered across the nation, to make full use of the abundant energy resources and surplus land.

For example, the company's photovoltaic power project in the Tarim oilfield, located in Northwest China's Xinjiang Uygur autonomous region, had generated 105.81 million kilowatt-hours of green electricity by September, equivalent to 22,000 metric tons of standard coal, while reducing 70,500 tons of carbon emissions. Nearly 20 percent of the electricity generated is used for the oilfield's own consumption, it said.

The percentage of renewable energy output of the company, including solar and wind power, is expected to account for 7 percent by 2025 and further rise to one-third by 2035, equal to that of oil and gas by then, it said.

All the efforts are in accordance with China's ambitious shift from its dependence on coal to renewables for power generation — a boon to achieving the country's carbon peak and carbon neutrality goals and tackling global climate change.

According to China's 14th Five-Year Plan (2021-25) for the renewable energy sector, renewable power will account for more than 50 percent of the increase in primary energy consumption from 2021 to 2025. By 2025, renewable energy consumption will amount to the equivalent of saving 1 billion tons of standard coal, it said.

According to global consulting firm McKinsey &Co, as the traditional business model of oil and gas players is under pressure, investing in the sustainable-power value chain can provide them an opportunity to diversify and play a leading role as the industry transitions.

Oil and gas companies are well positioned to play a meaningful role in energy transition, considering their global scale, large balance sheets and cash positions, as well as their long-standing relationships with energy customers and stakeholders, it said.

While fossil fuels such as oil and natural gas will continue to make up a significant share of the energy mix by 2050, the market research firm believes such players can offer distinctive value propositions in energy transition, including offshore energy projects, hydrogen production and transportation, electric vehicle charging as well as decarbonization solutions.