China's petroleum resources are a key to its industrial development. Crude oil production increased from 102,000 barrels per day in 1960 to 3.3 million per day as of 2002. In 1998 China had proven reserves of 24 billion barrels. The major producing centers are the Daqing field in Heilongjiang, which came into production in 1965 and accounts for nearly one-third of national production, and the Liaohe field, located in northeastern China. In addition to numerous other mainland finds, China has potential offshore reserves in the Bo Hai area (thought to have reserves of over 1.5 billion barrels) and the South China Sea, especially in the vicinity of Hainan Island.
By the mid-1970s, China no longer had to rely on oil imports; petroleum exports had, in fact, emerged as a major source of foreign exchange earnings. More than 9,740 km (6,050 mi) of long-distance pipelines transport the oil from fields to refineries and other points of consumption and export. China, however, became a net importer of oil in 1996, because rapid increases in oil demand from high economic growth rates outpaced the slower increases in oil production.
After rising dramatically in the early 1980s, owing largely to the discovery and exploitation of vast deposits in Sichuan Province during the late 1950s and early 1960s, natural gas output stagnated somewhat in the late 1980s. As of 2002 natural gas supplied only 3% of the country's energy. However, with proven reserves totaling over 1.4 trillion cu m (48 trillion cu ft), it was expected that consumption would triple by 2010. In 2000, total national production reached 27.2 billion cu m (960 billion cu ft). A pipeline to transport natural gas from the Xinjiang province in the west to Shanghai in the east was planned, with Shell chosen to lead a consortium of development companies.
Although China's rivers provide a vast hydroelectric potential (an estimated 378 million kW), only a small part has been developed. In the late 1990s, after economic growth slowed due to the Asian economic crisis, the government declared a two- to three-year moratorium on construction of new power plants due to an oversupply problem. The main hydroelectric projects include Ertan in Sichuan Province, Yantan in Guangsxi Zhuang Autonomous Region, Manwan in Yunan Province, Geheyan in Hubei Province, Wuqiangxi in Hunan Province, Yamzho Yumco in Xizang Autonomous Region, and Lijia Xia in Qinghai Province. In April 1992, the government approved the construction of the largest hydropower project in China—the Three Gorges Project on the middle reaches of the Chang Jiang. Construction, begun in 1996, was still underway in 2002, with completion of the 26 hydropower generating units slated for 2009. The Three Gorges Project has a designed capacity of 17,680 MW and will require the relocation of millions of people just in Sichuan Province alone. A second major hydroelectric project, consisting of a series of dams on the Yellow River, was also underway in 2002.
In 2001, China's net installed electrical generating capacity was 318.3 million kW, up from 115.5 million kW in 1988. Total output of electricity increased during the 1988–98 period from 545 billion to 1,098 billion kWh. Net generation in 2000 was 1,288 billion kWh, of which 81.8% was from fossil fuels, 16.8% from hydropower, and 1.2% from nuclear power. Electricity consumption in 2000 was 1,206 trillion kWh.
Traditionally, coal has been the major primary-energy source, with auxiliary biomass fuels provided by brushwood, rice husks, dung, and other noncommercial materials. The abundance of coal continues to provide cheap thermal power for electric plants. In 2000 China was both the world's largest coal producer, at 1,270 million tons, and its leading consumer of coal, at 1,310 million tons. Coal comes from over two dozen sites in the north, northeast, and southwest; Shanxi Province is the leading producer. Recoverable reserves as of 2000 were estimated at over 126.2 billion tons. As of 1996, China accounted for 11.1% of the world's proven reserves of coal. Large thermal power plants are situated in the northeast and along the east coast of China, where industry is concentrated, as well as in new inland industrial centers, such as Chongqing, Taiyuan, Xi'an, and Lanzhou. In 2000, coal accounted for 63% of primary energy consumption. By that year, some of the country's large coal-producing companies had returned to profitability following a period of oversupply in the late 1990s that led to the closure of many small mines.
The 279 MW Qinshan nuclear power plant near Shanghai began commercial operation in 1994. That same year, two 944-MW reactors at the Guangdong facility at Daya Bay also started commercial service. In 1995, Chinese authorities approved the construction of four more reactors. Net capacity for China's three nuclear reactors was estimated at 2,167,000 kW in 1996. As of 2002 construction of several nuclear power projects was underway. The first unit of the Lingao nuclear power plant came online in May 2002; a second unit was scheduled to begin operating in May 2003. Nuclear generation was planned to play a secondary but important role, especially in areas that lack both hydropower potential and major coal resources.
China ranks as the world's second-largest consumer of energy (after the United States). The goals of China's ninth five-year plan (1996–2000) included building power plants (primarily coal), strengthening oil and gas exploration and development, improving energy inefficiency, and developing rural energy (including small hydropower, solar, geothermal, and biogas).