• 2 minutes Oil prices going down
  • 11 minutes China & India in talks to form anti-OPEC
  • 16 minutes When will oil demand start declining due to EVs?
  • 1 hour Oil prices going down
  • 4 hours We Need A Lasting Solution To The Lies Told By Big Oil and API
  • 1 day Trump Hits China With Tariffs On $50 Billion Of Goods
  • 4 hours Another WTH? Example of Cheap Renewables
  • 2 days Bullish and bearish outlook for oil
  • 2 days Rolls Royce shedding 4,600 jobs
  • 3 days After Trump-KJU, Trump-Putin Summit
  • 1 hour What If Canada Had Wind and Not Oilsands?
  • 1 day When will oil demand start declining due to EVs?
  • 1 day Russia's Rosneft 'Comfortable' With $70-$80 Oil Ahead of OPEC Talks
  • 4 hours The Wonderful U.S. Oil Trade Deficit with Canada
  • 2 days U.S. Cars Will No Longer Need 55mpg Fuel Efficiency By 2025.
  • 3 hours The Permian Mystery
  • 8 hours China & India in talks to form anti-OPEC
  • 22 hours Gazprom Exports to EU Hit Record
  • 2 days Epic Fail as Solar Crashes and Wind Refuses to Blow
Alt Text

240,000 Bpd Offline Following Clashes In Libya

Continuing clashes between the Libyan…

Alt Text

Is This The Most Contentious OPEC Meeting Yet?

OPEC’s members have been divided…

Alt Text

Who Gets Hold Of Russia’s Key Oil Hub?

25 percent of the Novorossiysk…

Charles Kennedy

Charles Kennedy

Charles is a writer for Oilprice.com

More Info

Trending Discussions

China’s Oil Majors Are Burning Through Oil Reserves

Oil shipping

China’s state-owned oil companies have been beaten down by low oil prices and stagnant demand at home. PetroChina and Cnooc reported dismal earnings this week, and offered little reason for hope moving forward.

PetroChina said its profit fell by 98 percent in the first half of 2016 compared to the same period a year earlier. The company’s crude oil output fell by 4.2 percent as aging fields continue to deplete. Cnooc put up even worse numbers, reporting a 7.7 billion yuan loss, a remarkable downfall from the 14.7 billion yuan profit in the first half of 2015. Cnooc has been dragged down by its $15 billion purchase of Nexen a few years ago, a Canadian oil sands producer that has bedeviled its Chinese parent company for quite some time.

Nexen has suffered oil spills, explosions, and other safety issues. Cnooc took a US$1.6 billion impairment charge on overseas assets, largely because of the troubled oil sands producer. Cnooc made the unfortunate decision of paying top dollar for the company at the height of the market in 2013.

The Chinese oil companies offered up some small achievements, however. Cnooc said that it has achieved cost reductions on the order of 15 percent. It also took the ax to capital expenditures, reducing spending by 33 percent. But it still intends to produce as much as possible, which as The Wall Street Journal reports, presents a longer-term problem for the state-owned company. Cnooc is extracting its oil reserves at a worrying pace. The WSJ says that its reserves in China – some of its most lucrative – can only last for three years at current production rates. Cnooc also has an overall reserve life of only 8.4 years, one of the lowest relative to its international peers.

That suggests that Cnooc will probably have to cut production at some point, perhaps sooner rather than later. Or it will have to dramatically step up spending to develop other oilfields in order to replenish its reserves, which would be an about-face from its current cost-cutting efforts. It will probably be politically difficult to cut production, so the latter option is more likely – Cnooc may be forced to step up spending or make other acquisitions to prevent production declines.

In short, falling revenues and a weak portfolio of assets could force some tough decisions in Beijing.

By Charles Kennedy of Oilprice.com

More Top Rrads From Oilprice.com:

 




Back to homepage

Trending Discussions


Leave a comment
  • Hank Reardon on August 25 2016 said:
    Any possibility of purchasing heavily indebted US E&P companies? Perhaps California fields would be appealing?

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News