CNOOC maintains 2021 oil, gas output target despite more new projects due online in H2

China National Offshore Oil Corp. Ltd. kept its 2021 production target unchanged despite first-half output exceeding its guidance while more new projects are expected to come on stream in the second half, CEO Xu Keqiang said.

The Hong Kong-listed offshore producer's oil and gas output hit 1.54 million b/d of oil equivalent in H1, rising 8.4% year on year and surpassed its production target of 1.49 million-1.52 million b/d for 2021.

Speaking during the company's 2021 interim results call late Aug. 19, Xu attributed the strong growth to the management's efforts in taking advantage of a crude oil price recovery to bring six new projects online while stabilizing production from aging fields by water injection.

The state-owned company lifted its domestic crude oil output by 10.5% year on year to 154.1 million barrels in January-June, the company's result showed.

This meant CNOOC contributed about 86% of China's crude oil output growth of 17.06 million barrels in the same period, according to data from the National Bureau of Statistics.

There is no doubt CNOOC would continue to be the biggest contributor to China's crude output growth in the coming years as the company is in the golden period for exploration and development amid hefty reserves, according to Xu.

Peak production at the six producing projects totaled 103,760 boe/d, while the 13 projects which are targeted to commission in H2 are expected to contribute 117,472 b/d of peak production, according to the interim results.

Rising production combined with the crude price recovery helped CNOOC boost its net profit by 221% to Yuan 33.33 billion ($5.13 billion) in H1, a level similar to the years with the Brent price above $100/b.

"In H2, there are uncertainties in COVID-19 pandemic globally, while it is also a challenge to the management for resources allocation to the 13 new projects' commissioning," Xu said.

He said the pandemic could interrupt commissioning of CNOOC's overseas projects in H2.

CNOOC has two projects overseas due to startup production in H2 -- the Buzzard Phase II in the North Sea and Mero Phase I in Brazil, with a peak production of 12,000 boe/d and 171,000 boe/d, respectively.

Green energy

CNOOC targets to have its non-fossil resources account for more than half of the company's energy resource mix by 2050 as part of an effort to meet the country's net-zero target, according to Chairman Wang Dongjin.

"We will leverage the company's comparative advantage and integrate the development of oil, gas business and new energy business," Wang said during the call.

In addition to cutting emissions throughout its upstream production process, CNOOC would continue to boost its natural gas output to account for 35% of the company's oil and gas production mix by 2025 from the current level of slightly above 20%, Wang said.

Meanwhile, the company plans to invest 5%-10% of its annual capex in new energy development during the 14th Five Year plan (2021-25), Wang added. In contrast, the proportion was about 3%-5% by end-2020, S&P Global Platts previously reported.

CNOOC spent Yuan 36 billion in H1, up 1.1% year on year. Its 2021 capex target is set at Yuan 90 billion-100 billion.

In the new energy development arena, "we will continue developing our offshore wind power projects on a large scale, and selectively develop onshore photovoltaic power and onshore wind power," Wang said.

CNOOC's preliminary target is to obtain 5-10 GW of offshore wind power resources in 2021-25 and to generate about 1.5 GWh of electricity, while aiming to buy more than 5 GW of onshore wind power and onshore photovoltaic power resources during the period, according to Wang.

Moreover, CNOOC plans to partner with big power producers to explore and develop concentrated onshore PV projects. The company will leverage the synergy of integrating natural gas and distributed onshore PV projects at the same time, Wang added.

Wang said the company would begin production at its pilot Qinhuangdao/Caofeidian onshore power project soon. The project is expected to reduce CO2 emissions by about 170,000 mt/year.

CNOOC has set up a new department and a research institute for new energy, and the company would release its road map for carbon peak and neutrality soon, according to Wang.

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Source: Company 2021 interim result