The production target of the Daqing Oilfield, China's largest oil deposit, will be cut by 2 million tons next year, after its output went below 50 million tons this year for the first time in two decades.

The field's production, which accounts for one-third of the nation's total, may further drop by 40 per cent to 30 million tons by 2010, according to Ge Baoyin, mayor of Daqing, which is in Northeast China's Heilongjiang Province.

Although the decline is expected on account of the oilfield's diminishing resources, it is the first time that a specific timetable for a decrease has been announced.

The production decision of China's most important oilfield means the nation has to increase its imports to feed economic growth, if no more reserves are found elsewhere.

China is expected to import 40 per cent of its oil by 2010.

Ge said they plan to cut the production by 2 million tons a year from now until 2010 to prolong Daqing's life span.

"The reduction will enable Daqing to pump oil for 20 to 30 years more," Ge was quoted by Hong Kong media as saying.

But a spokesman for Daqing Oilfield Co, a subsidiary of PetroChina - the largest domestic oil producer - said the 40 per cent output cut was only a possibility, rather than being fixed.

"We have only decided to reduce the production by 2 millions for next year. We have not made a plan for such a long period," said Li.

Li said the reduction schedule made by the city government is only being used as a blueprint to map out future economic development.

But PetroChina has the independent right to decide how much oil it should pump, Li said.

"The production target is based on two factors, the requirement of the national economy and the cost/profit assessment of production," he said.

"We can produce more than 30 million tons or less by 2010, depending on these two factors.

"It is meaningless to talk about production. It is the reserves that count. We can produce more for a shorter period, or produce less for a longer period."

Li also said the company is working hard to find new reserves in nearby areas.

The company has made a significant finding in Haila'er in the Inner Mongolia Autonomous Region, which will have an annual production of 1 million tons by 2005, the Xinhua News Agency reported recently.

With oilfields in the east drying up after decades of operation, Chinese companies are casting their eyes on western areas for reserves.

PetroChina said earlier it plans to invest more in exploration in western China, hoping to find 800 million tons of reserves in the next three years. Of the reserves it discovers, it is hoped that one-third of them will be economically viable.

The discoveries could offset the decline in reserves in the company's existing oilfields, one of its senior geographic engineers said.

"We are shifting our focus to the western regions, although we will also work to keep production (in the east) from dropping too sharply," said the engineer, who wanted to remain anonymous.

The China News Agency reported earlier this month that a large oil deposit had been discovered in Jungger Basin in the Xinjiang Uygur Autonomous Region.

The initial assessment confirmed that the field boasts reserves of 100 million tons, the report said.

The finding is significant for Xinjiang "to grow as another Daqing by 2010," it said.

Still, there is a problem for companies in going west.

"The western regions are far from major oil consumption markets in the eastern coastal regions, which will push up costs," PetroChina's geological engineer said.

(HK Edition 09/22/2003 page7)