I thought this would be an easy question to answer - the major Daqing oil fields in Heilongjiang (a region in Manchuria) were only discovered in 1959 under Communist rule. However, this is AskHistorians, and a one sentence answer won’t suffice. So I did a bit more digging.

To my surprise, I discovered there was indeed a fledgling oil industry in Manchuria during the 1930s and 1940s. Both crude oil and oil shale could be found in Manchuria, attracting interest and investment from foreign oil companies. These Soviet, American and British companies were expelled in late 1934 when an oil monopoly was proclaimed in Manchuria. The oil trade became exclusively Japanese, with Japanese-controlled companies such as the South Manchurian Railway and the Manchuria Petroleum Company expanding their oil operations in the region.

So why didn’t, or couldn’t, Japan exploit the rich oil resources in Manchuria during the 1930s and 1940s? The first reason was that the major oil field near Fushun, and two other smaller fields in the region, were only discovered in 1940. Oil drilling requires vast investment in infrastructure and equipment - oil is just a black, sticky liquid hidden underground until you have the tools and training needed to extract and refine it. It is also a time-consuming process, with crews often needing two years to reach full optimisation of oil extraction. The production of crude oil never reached its full potential before Japanese surrender in 1945.

While crude oil production was still in its infancy in Manchuria, shale oil production was relatively advanced. Oil shale deposits had been found before the 1930s all across Manchuria and the necessary equipment and infrastructure was already in place, with a pilot plant being built in 1924. However, the production of shale oil is much more labour-intensive than the production of crude oil. As a result, production costs are higher - in the modern day, shale oil often costs more than 60 US dollars per barrel as compared to the 30-40 US dollars per barrel of crude oil. An additional consideration was that shale oil had to be converted to crude oil for military and civilian use. While shale oil production was much more mature in Manchuria, it was, by nature, less optimal from an economic and military standpoint.

The final and most fundamental reason was that oil production in Manchuria and other parts of the Japanese empire was simply far outpaced by Japanese wartime oil consumption. Calculating both crude and shale oil production, foreign observers estimated that by 1945 Manchuria could produce around ten million barrels of crude oil. This was certainly not enough to cover the fifty-five million barrels of oil needed by the Japanese industrial-military complex to sustain its warmaking capability. The Japanese Empire’s Inner Zone, consisting of Manchuria, Korea, Taiwan, North China and Japan proper, could only produce one sixth of the oil needed. The remaining five-sixths had to be supplied from substitute fuels, synthetic oil and the increasingly precarious naval shipping lanes to the oil fields of the East Indies. Oil resources in Manchuria were simply not enough to satisfy the appetite of the Japanese war machine.

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Sources:

Stewart, John R. "Foreign Investments in Manchuria." Far Eastern Survey 4, no. 11 (1935): 81-85.

Kinzley, Judd C. Natural resources and the new frontier: constructing modern China's borderlands. University of Chicago Press, 2018.

Seow, Victor Kian Giap. "Carbon Technocracy: East Asian Energy Regimes and the Industrial Modern, 1900-1957." PhD diss., 2014.

Grajdanzev, Andrew J. "Manchuria: an industrial survey." Pacific Affairs 18, no. 4 (1945): 321-339.

Erselçuk, Muzaffer. "Japan's Oil Resources." Economic Geography 22, no. 1 (1946): 14-23.