Wednesday, 26 November 2008
CNOOC to Explore Deeps of the South China Sea
China National Offshore Oil Corporation (CNOOC) is planning to invest 200 billion yuan on oil and gas exploration in South China Sea in the next 10 years or so, and establish production capacity with annual output of 50 million tons, parallel to the Daqing Oil Field, China’s biggest oil field.
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CNOOC to Explore Deeps of the South China Sea
25 November 2008
China National Offshore Oil Corporation (CNOOC) is planning to invest 200 billion yuan on oil and gas exploration in South China Sea in the next 10 years or so, and establish production capacity with annual output of 50 million tons, parallel to the Daqing Oil Field, China’s biggest oil field.
CNOOC announced it would spend the money between 2009 and 2020. Xiao Zongqing, general manager of CNOOC’s Department of Investor Relations, said the 200 billion yuan was part of a general plan, focusing on the construction of exploration and development capacity for oil and gas fields deep in the sea. CNOOC will not put up the entire 200 billion yuan itself, other investors including its subsidiaries and overseas partners.
The 200 billion figure is actually an estimate, and the exact number has not been decided. CNOOC and its partners have not yet arrived at their respective investment proportions. Despite the global financial crisis, CNOOC suffers no funding problem, with sufficient cash flow and financing channels.
At CNOOC’s current technical level, seas deeper than 1,000 meters pose a big challenge. CNOOC’s deepest oil field at present is Liuhua Oil Field, with an average depth of 300 meters and the deepest extreme at around 500 meters. Usually, if the company wants to explore in seas deeper than 1,000 meters it must partner up with foreign companies.
A CNOOC insider said the firm would bring in a foreign partner in the development of the South China Sea oil fields. It has already signed long-term contracts with Husky and Amoco for the development of 10 areas there. The company will find business partners for the exploration and development of other areas of the South China Sea through bidding invitations.
The South China Sea has great potential. Proven reserves in deep-sea areas total 3.1 billion tons of oil. Its oil and gas resource may even exceed Daqing’s, but it has not yet been exploited. The annual oil production of South China Sea may reach 70 million to 80 million tons, or even 100 million tons, including the output of shallow seas. This will be a very important improvement to China’s energy supply.
CNOOC is now China’s biggest offshore oil and natural gas producer, and has business in 12 countries including Indonesia and Nigeria. CNOOC Chairman and CEO Fu Chengyu said at the company’s performance report in August that the exploration and development of oil and gas resources in deep-sea areas in the South China Sea would be the company’s focus in the future.
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