CNOOC to boost development budget

Oil and gas producer plans to allot 120b yuan for capital expenditure to meet production target

PUBLISHED : Tuesday, 21 January, 2014, 1:10am
UPDATED : Tuesday, 21 January, 2014, 9:22am

CNOOC, the mainland's biggest offshore oil and gas producer, plans to increase capital expenditure to between 105 billion yuan (HK$133.6 billion) and 120 billion yuan this year to improve exploration and development operations.

"In terms of US dollars, it is between US$17 billion and US$19 billion," said chief financial officer Zhong Hua, adding that the expenditure for last year was about US$12 billion.

The company said 65 per cent of the money would be pumped into development, 19 per cent into exploration and 14 per cent into production.

CNOOC reiterated the compound annual growth rate target for 2011-15 production of 6 to 10 per cent. It expects a busy pipeline of engineering and construction works, with about 20 new projects under construction this year.

Chief executive Li Fanrong said: "We have kept the growth target unchanged because we think the projects at hand are enough to help us meet the goal."

He added that the growth target was, however, subject to other elements such as government approval. "The government is stricter with examinations and approvals now than before," he said.

CNOOC's net production target for this year is 422 million to 435 million barrels of oil equivalent, including 69 million barrels contributed by Nexen. The state-backed company bought Calgary-based Nexen last year for US$15.1 billion.

Li said Nexen's performance was "in line with expectations" and CNOOC had bought the company because it believed Nexen would support the firm's growth "in the medium and long term".

The company's net production is estimated at 412 million barrels for last year, including 61 million barrels from Nexen.

A note by Barclays Research ahead of CNOOC's preview yesterday said the production outlook was the key variable to monitor. "Here, guidance has been credible in the past, with the company missing its targets only once in the past decade," the note said.

Barclays recently lowered its production forecast for CNOOC and now expects 6 per cent growth in 2014 and 15 per cent in 2015, implying a compound annual growth rate of 4.9 per cent over 2010-15.

Separately, the mainland's oil demand grew 1.6 per cent in 2013, the weakest annual increase in five years, according to Reuters calculations based on government data.

That lagged the latest forecast by the International Energy Agency, which had pegged the country's oil demand growth for 2013 at 3.8 per cent.