CNOOC project powers revival of renewable energy

China National Offshore Oil Corp, China's largest producer of offshore oil and gas, is back in the country's offshore wind power market after closing its renewable energy unit five years ago.

The company will be participating in a project in East China's Jiangsu province. Applying its engineering expertise and experience in offshore operations, it will further develop its clean energy portfolio.

Yuan Guangyu, CEO of CNOOC Ltd, the company's upstream listed arm, said the offshore wind power sector is aligned with the company's overall business, given its resources in offshore, which it can directly apply in the sector.

The company did not provide details of the exact location or size of the project.

CNOOC has vowed to steadily increase its reserves and production of oil and gas this year, aiming to produce 480 million to 490 million barrels of oil equivalent in 2019.

The company entered the offshore wind power business in 2006 and started operating the Chinese mainland's first offshore wind power plant the following year, which is located in Liaodong Bay in the Bohai Sea.

The plant's installed capacity is 1.5 megawatts. Work ceased in 2014 when the company's renewable energy unit closed down. The unit used to cover wind, solar and biomass projects.

CNOOC's latest Jiangsu project is the first offshore wind project it has worked on since then.

Analysts believe the company's return to the offshore wind market comes as the government boosts efforts to promote renewable energy and reduce the country's reliance on fossil fuels.

Insiders believe the offshore installations in China are expected to represent a growing focus for the wind-based energy industry. While offshore farms are common in European markets, the Asia-Pacific region is now expected to see a twenty-fold boom in the offshore wind segment between 2017 and 2027, according to consultancy Wood Mackenzie.

Although CNOOC has not disclosed any details about the size or scope of the new project, the announcement is consistent with China's broader strategy of reducing carbon emissions and investing in new technologies, Wood Mackenzie said.

This could be the first foray of CNOOC Ltd in the direction of becoming a more integrated energy company, although any such moves would be limited in the near term, it said.

For the first time, China installed more offshore wind capacity (1.8GW) than any other nation last year. It was followed by the United Kingdom (1.3 GW) and Germany (0.9 GW), according to data from the Global Wind Energy Council.

Joseph Jacobelli, a senior analyst of Asian utilities and infrastructure at Bloomberg Intelligence in Hong Kong, expects wind curtailment would drop again this year.

Wind curtailment refers to electricity generation that is lower than the effective power capacity due to unfavorable conditions. By 2020, curtailment will exceed the government target of 5 percent.

The rate was over 17 percent in 2016, 12 percent in 2017 and 7 percent last year, according to Bloomberg Intelligence.