CNOOC plans $29b deep sea exploration in S.China

November 25, 2008

SHENZHEN, China (Reuters) - China’s offshore oil explorer CNOOC will step up deepwater exploration in the South China Sea from 2009 and plans to invest 200 billion yuan ($29 billion) until the end of next decade despite a worsening global financial crisis, a senior executive said.

The investment is a long-term one and will be paid in phases, Li Fanrong, president of CNOOC’s Shenzhen unit, told reporters.
He said he believed the South China Sea has tremendous oil and gas reserves that could support this mega development project but did not specify the exact location for CNOOC’s exploration.
The investment will come from CNOOC’s two Hong Kong-listed arms -- CNOOC Ltd and China Oilfield Services Ltd -- and foreign investors, Xiao Zongwei an investor relations official said.
With slower output growth expected after 2010, the state-owned oil firm needs to develop remote deep sea areas to help feed the heavy energy demand of China, the world’s second largest consumer of oil after the United States.
CNOOC expected its annual deepwater production capacity in the South China Sea to be around 1 million barrels of oil equivalent per day, or 50 million tons a year, a similar size to the country’s Daqing oilfield, in the next decade, the company’s Shenzhen chief development engineer Luo Donghong said.
The South China Sea has estimated geographical reserves of about 3.1 billion tons of oil and gas.
“Based on the plan, CNOOC will gradually develop 1,500 metres to 3,000 metres deep water exploration and development ability from 2009 to 2010,” Luo said.
CNOOC has signed 4 deep sea production sharing contracts with small to medium independents, including Husky Energy.
CNOOC, which lacks experience and equipment for deep sea exploration, may need to team up with proven deep sea hands, such as BP, Total, Shell and Chevron in the project, analysts said.
But Luo said CNOOC had been developing its own technology and started research and development in the production of heavy equipment, including deep water drilling and pipe laying ships, with total investment of 15 billion yuan.
He said the company had not yet been affected by the global financial crisis but will be very cautious in executing the deep sea project.
Some analysts said territorial rows and claims from China’s Southeast Asian neighbors may limit the scope of the country to make an aggressive foray into deep sea regions. ($1=6.830 yuan)