CNOOC to Invest $29.4 Billion over 10 Years to Exploit Oil and Gas in South China Sea

---

Researched by Industrial Info Resources (Sugar Land, Texas)--CNOOC Limited (NYSE:CEO) (Beijing), a flagship of China National Offshore Oil Corporation (Beijing), will invest about $29.4 billion to exploit oil and gas in the South China Sea and to establish the capability of deepwater oil and gas exploration in about 10 years at depths between 1,500 meters and 3,000 meters. By that time, a large petroleum base is expected to be established in the sea with an annual production capacity of 50 million metric tons of oil equivalent, which is about the same as the output of the Daqing oil field, the largest continental oil field in China, according to CNOOC.

Despite the worldwide economic downturn, the major resource potential in the South China Sea could support such a large development program, said Li Fanrong, General Manager of CNOOC's Shenzhen branch. Next year, the deepwater exploration program will begin as scheduled. Related investments will be implemented in phases in a long-term base, Li said.

In about five to 10 years, CNOOC will invest $2.2 billion to research and develop deepwater drilling equipment, including $880 million for the research and development of a 3,000-meter deepwater drilling rig, and $440 million for a 2,500- to 3,000-meter deepwater pipe-laying boat.

Investments in the deepwater exploration program will partially come from CNOOC Limited, China Oilfield Services Limited (SHA:601808) (Beijing), and from foreign companies, including Devon Energy Corporation (NYSE:DVN) (Oklahoma City, Oklahoma), Anadarko Petroleum Corporation (NYSE:APC) (The Woodlands, Texas) and the BG Group (LSE:BG) (Berkshire, United Kingdom).

CNOOC reportedly has signed production-sharing contracts with four companies regarding deepwater exploration, including Husky Energy Incorporated (TSX:HSE) (Calgary, Alberta). Husky Energy's discovery of hydrocarbons in the Liwan 3-1-1 gas field in the South China Sea was one factor that prompted deepwater exploration in China. The gas field is expected to begin operation in 2012-13. According to the contract, CNOOC will take 51% of the rights in all commercial discoveries.

Industrial Info Resources (IIR) is a marketing information service specializing in industrial process, energy and financial related markets with products and services ranging from industry news, analytics, forecasting, plant and project databases, as well as multimedia services.