CNOOC 'confident' on output goals

Workers at a CNOOC subsidiary install equipment in Qingdao, Shandong province. CNOOC's net 2013 output is estimated at 412 million barrels of oil equivalent, including 61 million BOE from Nexen Inc. Jiang Zuofeng / For China Daily

CNOOC Ltd, China's biggest offshore oil and gas developer, on Monday announced its 2014 business strategy, which includes producing 422 to 435 million barrels of oil equivalent.

"We are confident of meeting our production target of 6 to 10 percent annual growth from 2011 to 2015," said Li Fanrong, chief executive officer, at a news conference in Hong Kong.

According to the company, about 69 million BOE of the output target in 2014 will come from Nexen Inc. The acquisition of Nexen raised CNOOC's output after the smooth integration of operations in the past year.

CNOOC's net 2013 production is estimated at 412 million BOE, including 61 million BOE from Nexen.

"Nexen's operations have been within our expectations in the past 10 months. It might look a little bit costly at present, but we invested in the company for strategic longer-term returns," Li said.

"Its regular projects in the North Sea in the United Kingdom are very competitive and generate good cash flow. Its major resources in Canada, namely shale gas and oil sands, will be one of our pillars for long-term development. But we need to lower production costs through better management and innovation," Li added.

"As the biggest overseas acquisition in history, CNOOC did a good job after the transaction," said Li Li, research director at ICIS C1 Energy, a Shanghai-based energy information consultancy. "CNOOC hasn't just gotten more production from the acquisition, it has learned advanced management techniques and gained technological experience through productive and effective internal communication."

She said in terms of new projects this year, the company has maintained its advantages in the upstream sector.

The company announced that it expects seven to 10 new projects to begin operations in 2014.

"Most of our projects will reach their production peak during 2014 and 2015," said CNOOC's Li. "Of course, that depends on whether the projects can kick off on time or not and if they can get approval, as the regulations are getting stricter."

Li said that the company is working hard to get two delayed projects back on track this year. The Lufeng 7-2 project and the Liwan 3-1 project were postponed last year.

"The production from Liwan 3-1 has been delayed because of unfavorable maritime weather. The construction work conducted by our partner, Husky Energy, on the deep water area, though not a big part, hasn't been completed as scheduled," he said.

"However, the part we manage, namely the shallow water part and the terminal, is going well. We are actively working with Husky in order to ensure the projects start production as soon as possible this year."

Referring to the Libra Field project in Brazil, which CNOOC took part in through a production-sharing contract at the end of last year, Li said it's too early to expect a profit.

"It's a world-class project. But it's still at the exploration stage. In the next one to two years, we need to invest more to determine the size of reserves. After that, based on a development plan, we will share our investment plan with shareholders," he said.

Company executives have avoided giving details about plans to raise funds. "It all depends on demand," said Zhong Hua, chief financial officer. "The company will seek more money in the capital markets as necessary. We will inform the shareholders if there is any plan."