Cnooc Expands Oil Output Off South China Coast to Reach Target

Cnooc Ltd., China’s biggest offshore energy explorer, is expanding oil production in waters off its southern coast to reach a target missed since 2011.

Cnooc is developing new projects based on findings near the island of Weizhou, 80 nautical miles east of the border with Vietnam, said Liao Hongyue, director of the Weizhou Island Terminal. It’s also enhancing current projects, he said.

“I’m positive more production should be possible out of this site once some of the programs underway begin to produce results,” Liao told reporters visiting the Weizhou Island Terminal on June 10.

The Weizhou rigs produce 45,700 barrels of oil equivalent a day, about 4 percent of the Beijing-based company’s global output. Cnooc produced 412 million barrels of oil equivalent in 2013, including 61 million barrels that came from Canadian unit Nexen Inc.

Weizhou is Cnooc’s biggest oil producer in the western part of the South China Sea, one of four major oil and gas producing areas off the shores of China. Cnooc started a new project in the Weizhou area last year, increasing the number of operational oilfields to four.

Rigs WZ11-4, WZ11-1, WZ12-1 and WZ6-12 produce mostly crude oil. Cnooc, which started WZ6-12 last year, has announced a new finding in an area called Weizhou 12-11.

Paracel Islands

Cnooc’s state-owned parent China National Offshore Oil Corp. last month placed an oil rig near the disputed Paracel Islands off the coast of Vietnam, leading to confrontations between Vietnamese and Chinese boats. The move set off violent anti-China protests in Vietnam and prompted China to evacuate thousands of its citizens.

The dispute comes amid rising tensions between China and its Asian neighbors, who are pushing back against Chinese efforts to exploit resources in disputed maritime areas. While the Weizhou projects border Vietnam, they are well within China’s territory and have never caused any sovereignty disputes in the past, Liao said.

Cnooc’s Zhanjiang unit, which runs the Weizhou projects, plans to increase oil and gas output in the western part of the South China Sea to 0.26 million barrels of oil equivalent a day by 2015, and 0.35 million barrels by 2020, according to presentation materials from Weizhou projects. The company didn’t provide current production numbers.

Aging Fields

Cnooc has failed to achieve the 6 to 10 percent growth target since 2011 as production at its aging offshore oilfields in China slowed. Chief Executive Officer Li Fanrong said the company can still achieve the 2011 to 2015 average growth targets by delivering higher growth this year and next.

Weizhou produces mostly crude and a limited quantity of gas as a byproduct. Production from Weizhou counts for 4 percent of its global total, and 60 percent of crude produced out of the western South China sea, according to a Bloomberg calculation based on numbers provided by the company.

Cnooc has four oil and gas producing areas in China, including Bohai Bay, East China Sea, eastern South China Sea and western South China Sea. The western South China Sea area shares its maritime border with Vietnam.

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