CNOOC Cuts Output Target on Delay in Developing Biggest Field
Feb. 2 (Bloomberg) -- CNOOC Ltd., China's largest offshore oil producer, cut its forecast of growth in production from 2006 to 2010 because of delays in developing what is expected to be the largest field off the country's coast.
Output may increase by between 7 percent and 11 percent a year during the period, down from an earlier range of between 8 percent and 12 percent, Chairman Fu Chengyu said in Hong Kong today. A project off northeastern China, estimated to contain higher reserves than any of CNOOC's other fields, won't reach full capacity until 2012, two years later than expected, he said.
Beijing-based CNOOC and its bigger rivals PetroChina Co. and China Petroleum & Chemical Corp. are boosting efforts to find oil and gas to meet the energy needs of the world's fastest- growing major economy. The delay at CNOOC's largest field may prompt cuts in production and earnings estimates for the company, said analysts including Lawrence Lau.
``The earlier forecasts made years ago now look too ambitious,'' said Lau, an oil and gas analyst with BOC International in Hong Kong. ``We'll need to update our expectations of the company's earnings as output is likely to come in lower-than-expected.''
CNOOC said it plans to increase total output of oil and gas to the equivalent of 160-165 million barrels of crude oil this year. That's below the 170-175 million estimate for 2005 the company made in 2001. Production from fields off China's coast may rise 19 percent to the equivalent of 141-146 million barrels of oil this year, from 118-123 million barrels in 2004.
``The adjustments were made because of project delays,'' Fu said during a press conference. ``The output is there, but will just be extended into the longer-term future. Still, a 19 percent offshore China output growth will be a record for us to achieve.''
Bohai Bay
Developing the PL19-3 field in Bohai Bay is taking longer than expected because the size of the project is larger than first estimated, Fu said. Conoco Phillips, the largest U.S. refiner, owns 49 percent of the project.
Output from an oil field off the northeastern city of Qinhuangdao will be lower than originally estimated because of ``complicated geology'' at the site, Fu said.
CNOOC plans to increase development capital expenditure by 33 percent to $2.2 billion this year and to maintain its exploration budget at $260 million.
Total capital expenditure this year is projected at $2.49 billion, down from an estimated $2.53 billion in 2004. The spending plan for 2005 doesn't include potential acquisitions, the company said.
CNOOC aims to achieve a reserve replacement ratio of 150 percent this year through new exploration programs, it said.
Sixteen new fields are expected to start production in 2005 and 2006 -- nine of them this year, the company said.
Indonesia
The company's share of output from its Indonesian operations should reach 19 million barrels of oil equivalent, CNOOC said, without providing comparative figures.
China's demand for crude oil increased 14 percent last year as the economy expanded 9.5 percent, the fastest pace in eight years. The nation's oil imports have risen over the past decade from zero to 41 percent of local consumption, as domestic production failed to keep pace with demand. The International Energy Agency expects oil demand in China to rise to 6.73 million barrels a day in 2005, 5.7 percent higher than in 2004.
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