* Marks commitment to unruly western region
* Comes as oil majors rush to replace ageing wells
* Spending equal to PetroChina’s 2017 E&P expenditure (Adds details)
BEIJING, July 25 (Reuters) - China National Petroleum Corp (CNPC) said on Wednesday it will spend more than 150 billion yuan ($22 billion) by 2020 to boost oil and gas production in the western region of Xinjiang, aiming to offset falling output from ageing fields in northeast China.
The increased spending will push output in the Xinjiang Autonomous Region to more than 50 million tonnes of oil equivalent between 2018 and 2020, CNPC said.
The investment is equivalent to the total expenditure by CNPC’s listed unit PetroChina, China’s top oil and gas producer, for oil and gas exploration and production in 2017.
CNPC’s Xinjiang operations churned out 11.45 million tonnes of crude oil last year, while the company produced 23.5 billion cubic metres of gas, equivalent to 17.1 million tonnes of gas, from the Tarim in the region, one of China’s largest gas basins, according to PetroChina’s 2017 annual report.
Based on these figures, the new investment would boost output from the region by at least 75 percent by 2020.
The spending spree underscores the need to replace output from the Daqing oilfield in the northeastern province of Heilongjiang as well as a push to increase the country’s natural gas output to meet growing demand for the fuel as part of Beijing’s shift away from coal.
Beijing also wants to increase development in the unruly Xinjiang region, which borders Central Asia, where hundreds have died in ethnic unrest in recent years.
“I think that the primary factor is to support the central government policy to invest more and support economic development in the west,” said Liutong Zhang, director at Hong Kong-based WaterRock Energy Economics.
“A portion of the money would be spent on the logistics, storage tanks, and also downstream gas infrastructure for the southern part of Xinjiang to use natural gas for environmental reasons.”
The boost is unlikely to affect import demand from the world’s top crude importer because new output will replace lost capacity elsewhere.
Still, it reflects the company’s growing confidence after a surge this year in the price of crude oil. State oil majors have also grabbed a bigger share of the lucrative fuel export market as smaller independent refiners struggle with tough new taxes and an environmental crackdown.
Sinopec is expected to post its best quarter since 2013 when it reports its second-quarter results in August.
$1 = 6.8024 Chinese yuan renminbi Reporting by Josephine Mason and Judy Hua; additional reporting by Tom Daly in BEIJING and Florence Tan in SINGAPORE; Editing by Christian Schmollinger and Richard Pullin