CNOOC, China’s offshore oil producer, has raised its capital expenditure and production targets substantially. Chief financial officer Yang Hua even went so far as to declare 2010 will be a ‘splendid year’ for the company. The company is targeting net production of 275m – 290m barrels of oil-equivalent for the year, compared with 226m – 228m in 2009. It is basing its target on an average price for WTI of $75.
CNOOC is also raising capital expenditure quite a bit:
In 2010, concentrating on production growth and intensive exploration program, the Company will budget a total capital expenditure of US $7.93 billion, representing an increase of 29.5% over the estimated capital expenditure of 2009. During the year, the Company’s capital expenditures for exploration, development and production are expected to reach US $1.47 billion, US $4.81 billion, and US $1.50 billion, respectively.
It’s a drop in the ocean compared to the country’s oil consumption.
If the upper end of CNOOC’s target is reached, it would raise their production from about 624,000 to about 794,000 barrels per day. For comparison, total Chinese output is around 4m b/d and Saudi Arabia produced 10m b/d in 2008. Depending on the composition of CNOOC’s output, such growth could potentially help push China into fourth place on the world producer list ahead of Iran, as the two were separated by a mere 200,000 barrels in 2008. It’s also possible that already happened in 2009, as EIA data for last year hasn’t been published yet.
The spending jump is obviously a big one for the company, but CNOOC is still pretty small bikkies compared to the western supermajors, who spend more like $20bn a year.
CNOOC announced in December they would this year be exploring in much deeper waters off the east coast, but this announcement doesn’t seem related to that, as any discoveries wouldn’t be likely to go into production in the same year. From today’s statement:
In order to maintain a sustainable growth, the Company will further enhance its exploration efforts in 2010. The Company’s exploration activities will focus on: exploration of oil in core areas, natural gas exploration, and deep water exploration, with intensive exploration program including 98 exploration wells, 21,000 kilometers 2D seismic and 11,800 square kilometers 3D seismic. The Company aims to achieve a reserve replacement ratio (RRR) of over 100% in 2010.