Chinese Oil Major Strikes It Big In South China Sea

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

A discovery well at the Huizhou 26-6 discovery in the Pearl River Mouth Basin in the Eastern South China Sea was tested to produce around 2,020 barrels of oil and 15.36 million cubic feet of gas per day.

CNOOC expects the new oilfield to become the first mid-to-large sized condensate oil and gas field in the shallow water area of Pearl River Mouth Basin.

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

CNOOC, together with PetroChina and China Petroleum & Chemical Corporation (Sinopec), are the national oil companies in Asia that have been the worst hit by the oil price collapse, analysts say. However, China's NOCs are now prioritizing the increase of domestic oil and gas production and cutting overseas operations.

In the longer term, China's push for boosting its energy security by increasing domestic production will support higher investments from the Chinese oil giants, according to Fitch Ratings. 

CNOOC Limited "plays a strategic role in safeguarding the country's energy security via its offshore upstream activities, both domestically and overseas," Fitch said last week, affirming its A+ rating on the company with a "stable" outlook. 

CNOOC's revenue and EBITDA will be weak this year due to the price collapse, but they are expected to gradually recover from 2021, in line with Fitch's oil and gas price deck.

By Tsvetana Paraskova for Oilprice.com

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