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Cnooc Plans to Drill Deepwater Wells in S.China Sea

Source: WSJ 12/6/2009, Location: Asia

Cnooc Ltd. (CEO) plans to start drilling deepwater wells in the South China Sea next year, marking the company's initial foray into deepwater oil and gas exploration, said an executive.

"In 2010, it's possible for us to drill one, two or even more exploration wells," said Xie Yuhong, general manager of Cnooc's unit in Zhanjiang.

He said the company, China's largest offshore oil producer, hopes to drill deepwater exploration wells with international partners in the South China Sea at depths of 1,500-1,800 meters.

Xie said he believes the South China Sea has tremendous resource potential that could support the company's output development in the future.

He said company officials made a series of overseas visits to Australia, Brazil and Nigeria to share experience in deepwater oil exploration technologies.

Cnooc's current exploration partners in the South China Sea include independent oil and gas producer Devon Energy Corp. (DVN), Canada's Husky Energy Inc. and BG Group PLC.

However, he didn't give details on the company's deepwater exploration plan.

The South China Sea is one of Cnooc's most important natural gas and oil producing areas, with typical water depths ranging from 40 to 120 meters.

Cnooc's deepwater drilling plan underscores the blue-chip company's drive to make the South China Sea a key production base in the coming years, with the area estimated to contain 22 billion barrels of oil equivalent.

With slower output growth expected after 2010, Cnooc needs to develop remote deep-sea areas to help feed China's heavy energy demand.

At the end of March, Cnooc said it expected its oil and gas output to grow at a compound annual rate of 6%-10% between 2011 and 2015, down slightly from 7%-11% for 2005-2010.

Xie said he expects oil and gas output from the western South China Sea to be 44.07 million barrels of oil equivalent this year, up 13% from 38.97 million barrels of oil equivalent in 2008.

"I believe output in the western South China Sea next year will exceed the level in 2009," Xie said.

According to Cnooc's 2008 annual report, it had 2.52 billion barrels of oil equivalent of reserves by the end of 2008, including 960 million barrels of oil equivalent in the South China Sea.

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