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China's Sinopec to shut four small oilfields at Shengli

[BEIJING] China's state-owned Sinopec will shut four small oilfields this year at Shengli in the eastern province of Shandong as low global oil prices take a toll on output from the country's ageing fields.

The four oilfields - Xiaoying, Yihezhuang, Taoerhe and Qiaozhuang - produce 60,000 tonnes, or 1,200 barrels per day (bpd), accounting for about 0.2 per cent of Shengli's output, a company newspaper said on Wednesday, a day after it first reported the closures.

Both reports were published on the Shengli Daily's official account in the Chinese micromessaging mobile app, Weixin. The first report, which did not give details on output cuts, has been removed.

It created "confusion and misunderstanding", the follow-up story said.

"We may reopen the four oilfields according to market changes," a Sinopec spokesman told Reuters on Thursday.

A persistent supply glut has knocked about 50 per cent off world oil prices since mid-2015, derailing mega projects and forcing producers such as Chevron and ConocoPhillips to slash budgets.

With no signs of a recovery yet, investments in the sector are expected to be hit further this year.

The Shengli field, which has been operating since 1974, lost 9.2 billion yuan (S$1.98 billion) in 2015, and 2.9 billion yuan in January 2016, the Shengli Daily said, due to weak oil prices.

The closures are expected to reduce losses by 200 million yuan, the paper added.

China is the world's No 4 crude producer, with an output of 4.3 million bpd in 2015 - up 1.7 per cent on year, and as a result it is feeling the pressure from the slump in oil prices.

The country's central economic planning commission said in January that on average domestic crude production costs more than US$40 a barrel. Benchmark Brent crude futures are currently trading under US$35.

Production at Shengli has already been falling, with data showing that between January and July 2015 Shengli produced 543,700 bpd of crude oil, versus 557,400 bpd in 2014.

Production at Daqing, China's oldest and largest field by output, fell roughly 12 million barrels, or 4 per cent, in 2015, data from China's official state news agency, Xinhua, shows.

However, with continued rise in domestic crude demand, China's oil imports rose almost 9 per cent in 2015 to 6.71 million bpd.

Growth in imports is expected to continue as China takes advantage of low prices to fill strategic reserves. Regulators are now allowing some non-major refineries to directly import and use imported crude oil.