CNOOC reserve may grow 37.6pc on acquisition, gas project

PUBLISHED : Saturday, 10 April, 2010, 12:00am
UPDATED : Saturday, 10 April, 2010, 12:00am

CNOOC, the mainland's dominant offshore oil and gas producer, could see its reserve grow by up to a third this year if it completes its acquisition in Argentina and gets government approval for a major deepwater gas field in the South China Sea.

Including new reserves from its existing fields, the potential reserve addition could amount to as much as one billion barrels of oil equivalent (boe), or 37.6 per cent of its reserve at the end of last year, according to Sanford Bernstein Securities senior analyst Neil Beveridge.

Growing reserve is necessary for oil and gas firms to ensure long-term production growth. CNOOC has targeted to raise output by 21 per cent to 28 per cent this year to between 275 million and 290 million boe. It is aiming for an average output growth rate of 6 per cent to 10 per cent for next year to 2015.

According to its annual report just released, CNOOC had 2.66 billion boe of reserve at the end of last year, up 5.7 per cent from a year earlier. The growth came primarily from a 6.8 per cent rise in reserve in oilfields in Bohai Bay in the north and a 26.3 per cent reserve increase in gas fields overseas. Beveridge attributed the growth to higher oil prices and development of new projects.

But since the Securities and Exchange Commission in the United States, where CNOOC is listed, changed its methodology for reserves booking, and companies were not required to restate their 2008 figures, it is impossible to tell how much new reserve was due to CNOOC's efforts. Reserves are no longer booked based on year-end oil price, but on the average annual price, hence smoothing out price volatility. Higher prices increase the amount of economically recoverable reserves.

CNOOC expects to complete the purchase of half of Argentina's Bridas Corp by June, which would boost its reserves by 318 million boe.