Cnooc Falls as China-Japan Dispute Threatens Undersea Oil, Gas Development
Cnooc Ltd., China’s biggest offshore energy producer, fell in Hong Kong trading as a growing territorial dispute between China and Japan in the East China Sea threatens to disrupt oil and gas development in the area.
The shares dropped 0.4 percent to close at HK$14.66, compared with the less than 0.1 percent gain in the benchmark Hang Seng index. China Oilfield Services Ltd., which counts Cnooc as its largest customer, declined 0.7 percent.
China severed senior-level government ties with Japan over the detention of a Chinese fishing boat captain after a collision with two Japanese coast guard vessels near a group of disputed islands in the East China Sea. Sovereignty would give the holder rights to undersea petroleum reserves and Cnooc is already producing oil and gas to the west of the disputed area.
“This could dampen sentiment toward any prior rhetoric of joint oil and gas development in the region and trigger kneejerk profit-taking in Cnooc,” Gordon Kwan, head of regional energy research at Mirae Asset Securities in Hong Kong, said in e- mailed comments.
A prolonged dispute in the East China Sea would have a limited impact on Cnooc, according to Kwan. Less than 1 percent of the company’s oil production and about 6 percent of its gas output comes from the area, he said. One percent of Cnooc’s proven oil reserves are in the East China Sea, according to Kwan.
Japan said earlier this year it may take a dispute with China over developing the Chunxiao natural gas field in the East China Sea to an international maritime tribunal.
Asia’s two biggest economies have failed to implement an agreement signed in June 2008 to develop the field together and Japan has objected to Chinese drilling near a contested border, former Chief Cabinet Secretary Hirofumi Hirano said on Feb. 22.
To contact the reporter on this story: John Duce in Hong Kong at Jduce1@bloomberg.net
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