CNOOC expects little change in output

Mainland oil giant still aims for average annual growth of up to 10 per cent in five years to 2015

PUBLISHED : Thursday, 31 January, 2013, 12:00am
UPDATED : Thursday, 31 January, 2013, 5:20am

CNOOC, the mainland's dominant offshore oil and gas producer, expects flat output growth this year but is maintaining its average annual growth target of 6 to 10 per cent in the five years to 2015.

The five-year target excludes new acquisitions, such as its US$15.1 billion purchase of Canadian oil and gas firm Nexen, which is pending approval by United States regulators.

"We are confident this acquisition will be completed in the first quarter," chief financial officer Zhong Hua told a press conference on CNOOC's goals for this year. "Our chief executive, Li Fanrong, originally planned to be at this conference but is now busy with the acquisition … our team is making all kinds of preparations for the deal's completion."

The deal, China's largest overseas acquisition ever, faced scrutiny by US regulators on national security issues, Zhong said, without elaborating.

Reuters quoted unnamed experts last month as saying one issue to be examined was whether some of Nexen's assets are too close to sensitive US military zones.

A small portion of the firm's assets are in the Gulf of Mexico in US territory. They contribute about 10 per cent of Nexen's total output.

Regulators in Britain - where most of Nexen's assets are located, in the North Sea - China, the European Union and Canada have approved the deal.

CNOOC aims to achieve oil and gas output this year of 338 million to 348 million barrels of oil equivalent (boe), close to its own estimate of actual output of 341 million to 343 million boe last year.

The target is based on an assumption that the West Texas Intermediate crude oil benchmark price will average US$90 a barrel, lower than last year's actual average of US$94.10.

Sanford C. Bernstein senior analyst Neil Beveridge said this year's flat growth target was disappointing but expected.

Given CNOOC has 24 projects under construction and 10 due to start up this year - mostly in the second half - Beveridge projected its output would grow 15.7 per cent next year and 13 per cent in 2015.

If the acquisition of Nexen is included, growth is estimated at 26.5 per cent this year, 13 per cent next year and 11.5 per cent in 2015.

CNOOC plans to spend US$12 billion to US$14 billion this year to find new resources, turn resources into ready-to-extract reserves, and build infrastructure to pump them out. This is between 30.6 per cent and 52 per cent higher than its estimated outlay of US$9.19 billion last year.

Beveridge said while this year's budget exceeded expectations, actual spending might be at the lower end of the range, given that CNOOC usually under-spends its budget.