CNOOC signs strategic cooperation agreements with nine international oil companies

CNOOC Limited has announced that its parent company, China National Offshore Oil Corporation (CNOOC), has signed strategic cooperation agreements with nine international oil companies including: Chevron, ConocoPhillips, Equinor, Husky, KUFPEC, Roc Oil, Shell, SK Innovation and TOTAL.

According to the agreements, the strategic cooperation areas are located in the Pearl River Mouth Basin offshore China, including Area A and Area B (existing mining license areas and the contract areas are not included). Area A is approximately 15,300 sq. km, with a water depth of 80-120 m and only open for the deep layers below Enping Formation of Paleogene. Area B is approximately 48,700 sq. km, with a water depth of 500-3,000 m and open for all the layers.

The agreements will facilitate the establishment of a long-term and stable cooperation and share the development opportunities to a certain extent in the strategic cooperation areas, creating conditions for the final signing of contracts. CNOOC Limited, as an independent oil and gas exploration and production company, is the only vehicle through which CNOOC engages in exploration, development, production and sale of crude oil and natural gas.

“The agreements cover cooperation on two offshore areas located in the Pearl River Mouth Basin, and are part of efforts by CNOOC to accelerate domestic exploration. The agreements were announced on the 40th anniversary of Deng Xiaoping’s unveiling of China’s historic Reform and Open Up policy, and can therefore be viewed as reaffirming China’s desire to attract international investment into its upstream sector,” Andrew Harwood, Research Director for Wood Mackenzie, said.

“The two Strategic Cooperation areas are understood to be prospective for ultra-deepwater, high-pressure/high-temperature, or low-porosity/low-permeability reservoirs. The international oil companies all have existing E&P operations in the country, and the agreements further demonstrate their commitment to involvement in China’s energy sector,” Mr Harwood continued.

“Should these strategic cooperation agreements progress into full exploration contracts, CNOOC will retain operatorship. We expect the company to raise its domestic exploration spend and become more active in terms of exploration in 2019. The Pearl River Mouth Basin is believed to hold significant deepwater gas and shallow water oil potential, and Wood Mackenzie expects the majority of future exploration investment to target this area,” Mr Harwood said.

“CNOOC has set its sights on raising gas reserves by 50% by 2025 and developing further its deepwater expertise. These agreements will help the company achieve its targets and hone its technical skillset,” Mr Harwood added. “Globally, Wood Mackenzie expects exploration budgets to remain steady in 2019. But with stronger prices, lower costs and a greater focus on commerciality, the exploration sector is now more resilient than ever, and is well positioned to generate positive full-cycle returns at oil prices of $50/bbl or even lower.”