CNOOC Lowers 2011 Production Target amid Bohai Oil Spill

August 26th, 2011 | Caixin

The company said its acquisition of the Bridas project in Argentina and complications from the oil spill in north China’s Bohai Sea impacted full-year production

China National Offshore Oil Corp. (CNOOC) announced a downward revision to its annual production target by 6.5 to 6.7 percent.

High oil prices on the international market led CNOOC, the country’s largest offshore oil producer, to book 51.4 percent growth in first-half net profit at 39.3 billion yuan, the company said in its mid-year report released August 24.

But in a conference call the same day, company management said CNOOC’s production targets for the year had been adjusted downward to between 331 and 341 million barrels of oil equivalents, primarily due to slow progress on the company’s acquisition of the Bridas project in Argentina and complications resulting from the oil spill on north China’s Bohai Sea.

CNOOC said it had planned to finalize the Bridas deal in the first quarter of this year, however the project is still awaiting approval by the Argentine government amidst the general election campaign in Argentina.

CNOOC previously estimated the Bridas project would contribute up to 2 million barrels of oil equivalent to the company’s full year production.

Citibank said in a report that even if CNOOC failed to get the go-ahead from the Argentine government on the Bridas project, the impact on its profits would be minimal considering the low gross margins of this project.

Oil leaks at offshore fields on the Bohai Sea, developed with the U.S. firm ConocoPhillips, also spurred CNOOC to adjust production targets downward.

CNOOC said some platforms were closed due to an oil spill on July 13, and they have yet to resume operation.

The suspension led to 22,000 fewer barrels of oil production a day for the company. CNOOC said it was premature to discuss the resumption of operations at the platforms, and that the most important task at this point is to push ConocoPhillips to complete its cleanup work.

Also in the phone meeting, CNOOC was repeatedly asked by Hong Kong media how much the company expected the Bohai spill to affect its future profitability and whether would be required to offer compensation. Company officials did not respond directly.

In the first half of 2011, CNOOC produced 168 million barrels of oil equivalents, increasing 12.9 percent year-on-year. CNOOC Chief executive Yang Hua said in the mid-year report that production continues to rise amid efforts to exploit new oil fields and wells, as well as the company’s new mergers and acquisitions since last year.

By staff reporter Wang Xiaocong

Category: China Oil Monitor