China Oilfield Services, the largest provider of such services in offshore China, plans to issue up to two billion yuan of long-term bonds to finance capacity expansion. China Oilfield, a sister company and major supplier of offshore oil producer CNOOC, would seek a shareholders mandate at an extraordinary general meeting for the issuance of bonds with terms of between 10 and 20 years, it said in a statement to the Hong Kong stock exchange. The proceeds will fund the construction and upgrading of drilling rigs, the purchase and building of chemical tankers and oilfield working tankers, upgrading of seismic vessels, construction of lift boats and bolstering working capital. The company did not give further details. Chief financial officer Zhong Hua said in July the firm planned 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. 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. One jack-up rig is expected to be added in 2008 and a second one in 2009. 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 benefited from increased drilling in offshore China and elsewhere, as high oil prices prompted oil firms to increase exploration spending. According to United States-based oilfield services provider Baker Hughes, the global oil rig count averaged 3,036 in the first 11 months of this year, up 10.5 per cent from last year's average of 2,746 and compared with 2,395 and 2,174 in the two preceding years. China Oilfield's bond issue plan comes as the company is seeking to buy into foreign peers, as part of efforts to gain foreign technology and boost overseas operations' contribution to sales to 30 per cent in 2008 from 17 per cent this year. Executive vice-president Chen Weidong last week said the company was in talks to buy a majority stake in a Russian onshore services provider. China Oilfield's bonds issuance is subject to approval from industry regulator National Development and Reform Commission, the People's Bank of China and the China Securities Regulatory Commission. The company has yet to set the date of the shareholders meeting. The shares fell 0.23 per cent to close at HK$4.29 yesterday.