China's CNOOC to prioritize production, expanding overseas business: executives

China's top offshore producer CNOOC will continue prioritizing exploration and development in domestic assets, while expanding overseas business and pushing forward energy transition actively and prudently, senior officials said March 21 at the company's 2023 annual results briefing.

"Strategically, we will invest more effort in exploration and development to lift domestic reserves and production as well as push forward energy transition in the long term," Chairman Wang Dongjin said.

CEO and President Zhou Xinhuai said the company will keep spending Yuan 13 billion-14 billion ($1.8 billion-$1.94 billion) annually in domestic exploration in the coming years. This accounted for 68.2% of the company's exploration capital expenditure of Yuan 19.8 billion in 2023, the annual results showed.

With continuous investment over decades, CNOOC discovered two large oilfields in the Bohai Sea and South China Sea in March, each with proven volumes of over 100 million mt, or 733 million barrels.

"The basins in China offshore are in the mid-range of maturity, providing a huge potential [for production]. With the further advancement of technology and improvement of management, I believe that the China offshore business will continue to contribute more," said Zhou, who has served as a geologist at CNOOC for over 20 years.

This suggests China's crude output increase is sustainable, as offshore oil has been the main contributor to the country's crude production growth since 2020.

In 2023, CNOOC's domestic crude and liquids production rose 6.6% on the year to 982,465 b/d, compared with China's combined 2% growth to 4.19 million b/d, according to the company's annual results and China's official data. The company's domestic gas output jumped 12.3% on the year to 638.8 Bcf in 2023, while China's gas production was up 5.8% at 8,111.06 Bcf.

"I would say [business in] China is our largest and most important battlefield. China is the largest market, and we enjoy the biggest advantage by being the closest to our consumers," Zhou said.

Looking into Angola

Zhou said CNOOC is also looking into oil, gas and other energy-related projects in Angola amid more and more interactions between China and the West African country.

"According to the board, our overseas business will continue to follow the principle of selecting the best in class. We insist on focusing on assets in the transatlantic as well as along the Belt and Road [Initiative]," Zhou added.

"Internationalizing is one of our development strategies, with the aim of building a top energy company in the world," Wang said.

CNOOC's assets in Africa are primarily located in Nigeria and Uganda. The company's production in Africa declined 23.9% on the year to 57,534 boe/day in 2023, accounting for about 3% of its total oil and gas output.

On its Russian projects, CNOOC will work with the operator of the Arctic LNG 2 project and other stakeholders to handle sanctions-related issues, said Xu Yugao, secretary of CNOOC's board of directors.

CNOOC's overseas crude and liquid production, which rose 11.3% on the year to 468,219 b/d on the back of new commissioning in its Guyana and Brazil assets in 2023, is for marketing globally for the best prices, a senior official told S&P Global Commodity Insights on the sidelines at the briefing.

Zhou said CNOOC insists on keeping its all-in cost below $35/boe, with the company cutting its cost to $28.83/b in 2023 from $30.39/b a year ago.

On track to meet carbon peak in 2028

Wang said CNOOC is maintaining its target to meet the carbon emission peak in 2028 and neutrality in 2025, while its global peers adjust their energy transition pace.

"Energy transition needs to be economic and efficient. Constructing new energy systems is a long-term process," Zhou said, adding that CNOOC spends only 5%-10% of the annual capex in the new energy business, which is prudent.

CNOOC is China's leading company in offshore wind power development as well as offshore carbon capture and usage, and it is also stepping into the hydrogen business.

It targets spending Yuan 125-135 billion in 2024, up from Yuan 129.6 billion in 2023 and Yuan 102.5 billion in 2022.

Meanwhile, CFO Wang Xin said the company will keep the relatively high annual capex to support the rising production with sufficient reserves for the 2026-2030 period.

CNOOC targets to produce 1.95 million boe/day in 2024, up about 5% from 1.86 million boe/day in 2023, with higher projections of 2.16 million boe/day in 2025 and 2.25 million boe/day in 2026.

CNOOC's operation results:

CNOOC's crude oil output: (Unit: million barrels)

CNOOC's gas output: (Unit: Bcf)

Source: CNOCC annual results