Chinese oil giant CNOOC slashes output and spending amid worst downturn in decades

The worst oil market and economic downturn in decades has forced CNOOC, China’s dominant offshore oil and gas producer, to slash its project spending budget for this year by 11 per cent and its output target by 3 per cent as it winds down unprofitable projects overseas.

The state-backed firm aims to spend 75 to 85 billion yuan this year – instead of the 85 to 95 billion yuan targeted in January, while its production target has been revised down to 505-515 million barrels of oil equivalent (boe) from 520-530 million boe, it said in a filing to Hong Kong’s bourse after the market closed on Wednesday.

“Under the current low oil price environment, the company has adjusted its operating strategy promptly and implemented more prudent investment decision-making to ensure its long-term sustainable development,” it said.

The company posted a 5.5 per cent year-on-year first quarter revenue fall to 40 billion yuan, as a 19.3 per cent fall in the oil price more than offset a 9.7 per cent output rise.

June futures for the Brent crude international benchmark gained 2.3 per cent to US$20.93 a barrel during the late afternoon in Asia, having lost two thirds of its value in three months because of oversupply as international lockdowns during the coronavirus pandemic sapped 30 per cent of global demand.

CNOOC’s production and spending cuts will largely take place in shale oil projects in the US and oil sands projects in Canada, where production will be kept at minimum levels so that it will go into “natural decline”. Complete shutdowns are “very difficult”, chief financial office Xie Weizhi told reporters via teleconference, adding that staff retrenchment is unavoidable.