Oil producer targets an increase of 8pc to 12pc in production, but says offshore development will be the growth driver CNOOC, the mainland's dominant offshore oil producer, plans to increase oil and gas production by 8 per cent to 12 per cent a year between 2005 and 2010, with the development of offshore reserves being the main growth driver due to falling output from existing fields. Speaking to the press yesterday for the first time since becoming chairman of CNOOC last month, Fu Chengyu said the growth target was respectable by international standards, although lower than the 15 per cent annual rate estimated for 2000 to 2005. 'Fifteen per cent annual growth from 2000 to 2005 is exceptional ... as our company's scale grows bigger year after year, it is not as easy to maintain the same growth rate,' he said. According to the company's projections, about half its production in 2010 will come from the development of existing reserves, while new reserve discoveries will account for 23 per cent. The contribution from already announced overseas acquisitions will be about 9 per cent. Mr Fu said the company was on track to reach this year's oil and gas production target of 134 million to 138 million barrels of oil equivalent (boe), despite a 7.5 per cent year-on-year decline in production in the third quarter. Production increased from 87 million boe in 2000 to 96 million boe in 2001 and 127 million boe last year, but with growth slowing, CNOOC expects to produce about 145 million boe next year. Growth is expected to pick up again in 2005, when 170 million to 175 million boe is expected to be produced. By 2010, it expects to produce 265 million to 305 million boe. Capital expenditure for oilfield development jumped a comparative 44.7 per cent in the first nine months of this year, but spending on exploration of new reserves fell 31.8 per cent. Chief financial officer Mark Qiu Zilei said that because of its relatively high level of reserves, and relatively high oil prices, the company would rather spend more money to develop them and ramp up production than find new reserves. He attributed the fall in third-quarter production to disruptions caused by typhoons and an increase in maintenance requirements. Total oil and gas sales revenue for the first three quarters surged 26.5 per cent year on year to 21.22 billion yuan (HK$19.71 billion), on the back of a 6.2 per cent growth in oil and gas production volume and a 22.8 per cent rise in realised oil price to US$28.02. Its realised gas price fell 7 per cent due to higher sales to lower-paying industrial customers. CNOOC plans to spend US$1.5 billion on exploration and oil field development this year and next. The spending is projected to rise steadily to $2.01 billion to $2.19 billion in 2008, but fall back to between $1.91 billion and $2.09 billion in 2010. When asked whether he would step down from the helm of sister firm China Oilfield Services (COSL), Mr Fu said: 'I brought COSL to the capital market ... as long as it has brought good returns to shareholders since its listing, my job can be considered done.' CNOOC has a record of separation of management between itself and COSL to enhance independence, especially on issues related to connected transactions.