As the world’s two largest oil importers grapple with geopolitical risks, supply disruptions, and the imperative of energy security, both China and India are pouring billions into boosting domestic oil and gas output. While progress varies sharply between the two Asian giants, the shared strategy underscores a long-term bet on self-reliance — even as new production takes years to materialize and global markets feel the ripple effects.
China’s Record Domestic Surge: $470 Billion Bet Pays Off (Slowly)
China has delivered the most tangible results. Under its Seven-Year Action Plan (2019–2025), launched after President Xi Jinping’s 2018 directive to “vigorously increase exploration and development,” the national oil companies (NOCs) — PetroChina, Sinopec, and CNOOC — have dramatically ramped up upstream spending.
Domestic crude output climbed from 3.8 million barrels per day (b/d) in 2020 to an average of 4.3 million b/d in 2025 — a roughly 12–13% increase and the strongest modern-era performance for the country. Annual figures hit record highs, with 2025 crude production reaching approximately 215 million tonnes (~4.3 million b/d) and natural gas output exceeding 260 billion cubic meters for the ninth straight year of double-digit gains in some metrics.
Key drivers include:Accelerated drilling and unconventional plays (tight oil/shale in Songliao and Sichuan basins, offshore Bohai expansions).
CNOOC’s offshore production jumping ~40% (from 690,000 b/d in 2020 to 900,000 b/d).
PetroChina holding ~2.5 million b/d and Sinopec ~600,000 b/d.
Bloomberg reports the NOCs have committed roughly $470 billion (or ~$468 billion since 2019 per some tallies) in exploration and production (E&P) capital, with capex surges of 90% for PetroChina and fourfold for CNOOC in key periods. Policy reforms — shifting to market-based bidding for blocks and six licensing rounds in 2025 alone — have opened acreage, though mostly to domestic players.
Yet challenges persist. Legacy mega-fields like Daqing and Shengli continue declining (e.g., Heilongjiang output fell from 604,000 b/d in 2020 to 579,000 b/d). Production gains have required outsized investment: modest reserve additions lag output in places, and unconventional resources demand advanced tech and face geological hurdles. Even with these efforts, imports still cover 70–75% of demand (~11–11.65 million b/d in recent periods), prompting massive strategic stockpiling (inventories grew by tens of millions of barrels in 2025).
India’s Import Dependence Hits Near-Record 89% as Output Lags
India tells a tougher story. According to the Petroleum Planning & Analysis Cell (PPAC), oil import dependence reached 88.6% in the first ten months of FY26 (April 2025–January 2026), up from 88.2% the prior year and 88.3% for full FY25. Full-year FY26 could push even higher amid record imports (~5.2 million b/d in January) and stagnant domestic output.
Crude production hovers around 580–600 thousand b/d (e.g., 594 kb/d in October 2025, with November indigenous crude + condensate at 2.3 million metric tonnes). This has shown only marginal or volatile growth, with declines in key nomination fields (Mumbai Offshore, Assam) offsetting modest gains elsewhere. Total oil production (including NGLs) sits near 950 kb/d, but crude remains the core bottleneck against consumption of ~5.6 million b/d.The government is responding aggressively:Open Acreage Licensing Policy (OALP) rounds offering dozens of blocks (50+ in recent pushes).
Targets to expand exploration to 1 million square kilometers.
Plans to attract $100 billion in oil and gas investments by decade’s end.
Prime Minister Narendra Modi’s “Make in India, Invest in India” call for $500 billion in broader energy opportunities.
Despite these moves, results lag due to aging fields, limited recent discoveries, high exploration costs, regulatory/tax hurdles (government take often 60–70%), and slower private/foreign participation.
Common Hurdles: Why “Ramp-Up” Takes Years
Both nations face structural realities that temper optimism:
Mature basins — Decades-old fields in decline require enhanced recovery or new frontiers.
Geological and technical challenges — Tight/shale plays and deepwater/offshore demand heavy capex and expertise.
Time lags — From licensing and seismic to first oil/gas often spans 5–10+ years.
Investment efficiency — China shows huge spending yields single-digit to low-double-digit production gains; India’s slower pace reflects even steeper barriers.
Energy security remains the North Star.
For China, it’s about insulating against U.S. tensions or chokepoint risks; for India, it’s shielding a fast-growing economy (projected to lead global oil demand growth at 220–330 kb/d annually in 2024–2025) from price shocks.
What This Means for Global Markets: Persistent Demand, Slow Supply Relief
The implications for global oil and gas markets are profound — and mostly supportive of prices in the near-to-medium term.
Sustained Import Pull: Even optimistic domestic ramps won’t slash import needs quickly. China’s production gains have offset some demand growth but not reversed ~11 million b/d import habit. India’s lag + surging consumption (now the world’s top incremental demand driver, surpassing China) means higher imports for years. This provides a demand floor for producers in the Middle East, Russia, the U.S., and Africa.
Price and Volatility Dynamics: Slow domestic progress keeps both nations exposed to global disruptions, amplifying volatility. China’s aggressive stockpiling (adding hundreds of millions of barrels capacity recently) has absorbed excess supply and helped stabilize prices in the $60–70 range at times. India’s diversification away from Russia adds competition for other barrels.
Geopolitical Shifts: Reduced vulnerability could alter trade flows long-term (less reliance on any single supplier). In the interim, both continue heavy buying, supporting upstream investment worldwide while they chase self-reliance.
Longer-Term Transition Overlay: Both are also accelerating renewables and EVs (China’s NEVs already displacing significant gasoline/diesel), which may cap eventual oil demand growth. But for the next 5–10 years, fossil production and import needs dominate.
In short, China’s measurable production wins and India’s ambitious spending signal serious intent on energy security. Yet the multi-year timelines mean global markets will continue to feel the weight of these two giants as buyers — not producers — for the foreseeable future. For upstream companies, service providers, and exporters, the message is clear: Asian demand isn’t going away; it’s just becoming more strategically managed.
As Stu Turley on the Energy News Beat Podcast says often, “Energy Security starts at home, but Energy Dominance comes from your Exports”, we will see how this plays out. Both India and China export a lot of refined products to the open markets, and this will be a huge factor going forward.
Energy News Beat will continue tracking OALP results in India, NOC drilling updates in China, and how these domestic efforts reshape trade patterns and pricing in 2026 and beyond.
Get your CEO on the #1 Energy Podcast in the United States: https://sandstoneassetmgmt.com/media/
Is oil and gas right for your portfolio? https://sandstoneassetmgmt.com/invest-in-oil-and-gas/
Be the first to comment