A worker at an oil refinery in Shaanxi province. Cnooc has targeted production of between 355 million and 365 million barrels of oil equivalent this year, up 8 to 12 percent from 2010 output. Frederic J. Brown / AFP

4 offshore China projects to come on stream in 2011

Cnooc Ltd, the largest offshore oil and gas producer in China, said Thursday it aims to boost its annual production by as much as 12 percent this year as a number of new projects are scheduled to come on stream.

The energy explorer has targeted production of between 355 million and 365 million barrels of oil equivalent (boe) this year, up 8 to 12 percent from the estimated 327 to 329 million barrels output in 2010, Chief Financial Officer Zhong Hua told a media briefing in Hong Kong Thursday.

Four new offshore China projects are expected to be put into operation in 2011 and two overseas projects - one in the US and the other in Argentina - are also estimated to start production this year, according to the company.

"The target Cnooc set for the year is not very aggressive," Linus Yip, an analyst with First Shanghai Securities, told China Daily. "Cnooc sped up its overseas acquisition last year aiming for a bigger development outreach. It was one of the best performers among the blue chips as it achieved notable growth last year."

Cnooc's 327 to 329 million boe production output in 2010 surged 44 percent from 228 million in the previous year.

The company's stock climbed almost 70 percent over the past year in the city, beating giants PetroChina and Sinopec, which have risen about 21 percent and 35 percent respectively.

Capital expenditure is expected to rise 55 percent this year to $8.77 billion as the company will strengthen exploration in new areas and frontiers, particularly in deepwater including the South China Sea which Cnooc said is under-explored and has huge potential.

"Deepwater areas will play an important role contributing to our medium and long-term growth," said Zhong. He added that the company's capital spending will stay at a high level to support the deepwater exploration in the coming years.

In 2010, Cnooc agreed to pay about $8.4 billion for energy assets in Africa, Latin America and the US to help boost production abroad. There are currently 15 new projects under construction, according to the company.

Zhong said Cnooc will continue to seek reserves growth through both exploration and acquisitions in the future.

He added that overseas fields may account for more than 30 percent of the company's overall production by 2015, from the current 20 percent, and the explorer's main assets will still be fields off the coast in the next three to five years.

Yang Hua, vice chairman of Cnooc, said the company will maintain a 6 to 10 percent annual production growth rate for 2011 to 2015, basically unchanged from the target set for the previous five years.

"But the comparison base now has been raised to 327 million boe, from the previous 275 million, which leads to a much higher production growth under the same growth rate," said Yang.

Although Cnooc initiated a $7.9 billion capital expenditure target for 2010, it only spent $5.64 billion last year according to rough statistics. Yang refused to elaborate on the reason for this.

Shares of Cnooc Thursday slid HK$0.06 or 0.32 percent to close at HK$18.62 in Hong Kong trading, in line with the 0.27 percent loss on the city's benchmark Hang Seng Index.

China Daily

(HK Edition 01/28/2011 page3)