Chinese oil major strikes hard in the South China Sea

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The listed branch of the China National Offshore Oil Corporation (CNOOC) said on Monday that it had made a major discovery of oil and natural gas in the eastern part of the South China Sea.

A Huizhou 26-6 discovery well in the basin of the mouth of the Pearl River in the eastern South China Sea has been tested to produce approximately 2020 barrels of oil and 15.36 million cubic feet of gas per day.

CNOOC expects the new oil field to become the first medium-to-large oil and condensate gas field in the shallow water area of ​​the Pearl River Mouth basin.

CNOOC’s new discovery could be a boon for China’s ambitions to boost domestic production of oil and natural gas in order to reduce its dependence on oil and gas imports. State-controlled CNOOC is one of the companies China has tasked with replacing domestic reserves, even though the oil price crash has forced Chinese state oil majors to cut capital spending to this year.

CNOOC, along with PetroChina and China Petroleum & Chemical Corporation (Sinopec), are the national oil companies in Asia that have been hardest hit by the collapse in oil prices, analysts said. However, Chinese NOCs are now giving priority to increasing domestic oil and gas production and reducing overseas operations.

In the longer term, China’s efforts to increase its energy security by increasing domestic production will support increased investment by Chinese oil giants, according to Fitch Ratings.

CNOOC Limited “plays a strategic role in safeguarding the country’s energy security through its upstream offshore activities, both domestically and abroad,” Fitch said last week, asserting its A + rating on the with a “stable” perspective.

CNOOC’s revenues and EBITDA will be low this year due to the collapse in prices, but are expected to gradually recover from 2021, in line with Fitch’s oil and gas price charts.

By Tsvetana Paraskova for Oilprice.com

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