China Oilfield Services plans to spend at least 2.48 billion yuan on two new drilling rigs and two new lift boats in the next three years to increase service capacity, according to chief financial officer Zhong Hua.
The move will help it meet growing demand for oil and gas drilling equipment in China's offshore regions and upgrade its drilling fleet.
The company, a unit of China National Offshore Oil Corp and a sister firm of dominant offshore oil producer CNOOC, planned to add one jack-up rig to its fleet in 2008 and a second in 2009, Mr Zhong said.
Each rig, which can work in depths of 300 to 350 feet, will cost 1.04 billion yuan to 1.2 billion yuan to build.
Most of the company's existing jack-up rigs can operate at maximum depths of 130 to 300 feet. It has one rig that can go as deep as 400 feet and is building another with the same capability.
China Oilfield has 10 jack-up rigs and three semi-submersible rigs. Jack-up rigs are supported by adjustable legs that rest on the seabed, while semi-submersible rigs float on buoyancy chambers anchored to the bottom of the sea.
'We are bolstering our capabilities to cope with increasing demand in offshore China where more and more oilfields are entering the production stage,' said Mr Zhong. 'Besides, our drilling fleet needs some upgrading and restructuring.'
Key customer CNOOC plans to raise its exploration expenditure this year by 72 per cent to US$455 million.
China Oilfield will also add one 'lift boat' to its fleet next year and another in 2008, each costing more than 200 million yuan. The boats provide logistics support for the provision of well services.
'We have been using drilling rigs to perform some of these services, which is not the most efficient way of using our resources,' Mr Zhong said.
China Oilfield also has plans to expand into the deepwater market. Management said in March that it could invest up to US$600 million to build a deepwater drilling rig in partnership with its corporate parent. Mr Zhong said the final investment amount would depend on equipment supply, rig building capacity and market demand.
The rig would likely have the capacity to operate in up to 3,000 metres of water.
Meanwhile, Mr Zhong said China Oilfield may not reach its target of achieving 25 per cent of its sales this year in overseas markets since its newest rig had been deployed in China. However, overseas business should account for more than 20 per cent of revenues.
Its drilling fleet operates in 15 nations, mainly in Southeast Asia and the Middle East.
Mr Zhong said the company was 'actively' seeking to acquire overseas firms with the technology, expertise and equipment that it lacks. Targets are mainly in Southeast Asia, Europe and the US.