CNOOC's H1 oil, gas output reaches record high; Arctic LNG 2 project on track

China's top offshore producer CNOOC reported record oil and gas output of 1.83 million b/d of oil equivalent in the first half of 2023 and maintained its annual target of 1.78 million-1.81 million boe/d, while the first train of Arctic LNG 2 project in Russia is expected to start in 2023 as scheduled, company executives said Aug. 18 during an interim results briefing.

"We will exert our best efforts in reserves and production growth, quality and efficiency enhancement, and technological innovation to reach our annual operational goals," Chairman Wang Dongjin said late-Aug. 17.

CNOOC targets to produce 2 million boe/d of oil, gas in 2025, with annual growths of about 6%, S&P Global Commodity Insights reported.

CNOOC's production rose 8.9% from 1.68 million boe/d in January-June last year, given the 14.4% year-on-year output jump overseas with the production ramp-up from Liza Phase II in Guyana and Buzios Oil Field in Brazil, according to the company's H1 result report.

Latin America concentrated about 35% of CNOOC's upstream production overseas. The company's output from the region surged 61.4% on the year to 196,000 boe/d in H1 2023.

Holding 7.34% working interest, CNOOC has commenced production from its Buzios 5 project in June, with a peak production of about 204,400 boe/d. The project will help to boost average output to 635,000 boe/d in the Buzios Oil Field with 11 FPSO in operation by 2027, according to the company.

In H2 2023, the company is set to commence the Payara project in Stabroek Block, Guyana, which would contribute a peak production of 55,000 boe/d to CNOOC's profile.

CFO Xie Weizhi said during the briefing that some of the production overseas is sold back to China, which is priced in dollars and settled in yuan.

Meanwhile, investment and construction of the Arctic LNG 2 project in Russia has been progressing smoothly, and is due to begin operations this year, according to Xie.

"All the stakeholders pay the funds on schedule," he said.

CNOOC has a 10% stake in the three-train 19.8 million mt/year Arctic LNG 2 project, which is also its solo asset in Russia. CNPC, TotalEnergies and a consortium of Japan's Mitsui and Jogmec -- called Japan Arctic LNG -- each hold 10% stake in Arctic LNG 2, while Russia's Novatek holds the remaining 60% stake.

The first 6.6 million mt/year train has now been installed on the underbase foundation in the seabed at the Utrenniy terminal on the Gydan Peninsula, which was expected to start up before the year-end, S&P Global reported citing Novatek.

Domestic output

CEO and President Zhou Xinhuai said domestic production would take a bigger proportion in CNOOC's output mix in the second half as more projects start up.

CNOOC targeted to commence six domestic projects in H2 2023, led by Bozhong 19-6 Condensate Gas Field Phase I Development Project and Lufeng 12-3 Oil Field Development. All these projects were expected to contribute a combined 75,916 boe/d oil and gas production, the report showed.

Domestic output contributed 69.7% or 1.28 million boe/d of CNOOC's total oil and gas production in H1 2023. The volume rose 6.6% year on year, driven by the increases from Kenli 6-1 in Bohai Bay and Lufeng 15-1 in South China Sea, the interim report showed.

In comparison, CNOOC's domestic production accounted for 71.1% of its global output.

The company's domestic crude production grew 5.8% year on year to 991,000 b/d in the first six months, contributing about 62% of China's crude output increment in the same period, according to calculations by S&P Global from data provided by CNOOC and China's National Bureau of Statistics.

CNOOC's Natural gas output rose 9.6% year on year at home to 306 Bcf, accounting for 7.5% of China's production, the calculations showed.

China produced 4.25 million b/d and 115.5 Bcm of crude oil and natural gas, respectively, in H1 2023, rising 2.1% and 5.4% year on year as the state-run companies' efforts on energy security, the NBS data showed.

Capex

The company ramped up its capital expenditure by 35.9% year on year to Yuan 56.50 billion ($7.76 billion) in H1, compared with its annual spending target of Yuan 100 billion-110 billion, according to the company's interim report.

The company's all-in cost was $28.17/boe, representing a year-on-year decrease of 7.1%, with the operational expenditure standing at $7.16/boe.

In green development, CNOOC connected Haiyou Guanlan and Wenchang deepsea floating wind power demonstration project to the grid for power generation, which would cut CO2 emission by 22,000 mt, the interim report showed.

It also successfully commenced a CCS demonstration project in the Enping 15-1 oilfield with a peak CO2 refilling capacity of 280,000 mt/year, using China's first offshore CO2 storage technology.

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Source: Company report