(Adds analyst comment, CNOOC share price move)
By Meng Meng and Chen Aizhu
BEIJING/SINGAPORE, Jan 18 (Reuters) - China National Offshore Oil Company, or CNOOC, said on Friday it aims to double its exploration activities and proven oil and gas reserves in China over the next seven years, a target that will see the state oil firm expedite capital spending.
This comes after President Xi Jinping’s call last August to improve national security by boosting domestic production and reserves, CNOOC said in a report published on its official social media account.
CNOOC, parent of CNOOC Ltd, did not give details about where it would explore or breakdowns of reserve targets on crude oil and natural gas.
CNOOC will be able to double its natural gas reserves over the period as its current reserve base is small, but it will be a challenge to deliver on oil due to lack of sizeable discoveries in the pipeline and relatively higher reserve base on oil, analysts at consultancy Wood Mackenzie said.
“Doubling both oil and gas proven reserves will be harder and would require several large oil discoveries, the size of Lingshui, to achieve and higher investment commitments,” said Angus Rodger, Woodmac’s research director for Asia-Pacific upstream business.
He was referring to CNOOC’s deepwater gas discovery Lingshui 17-2, 150 kms off China’s southernmost province of Hainan, that has proven geological reserve of over 100 billion cubic metres.
As its shallow-water basins mature, CNOOC will increasingly shift focus to deepwater exploration.
“We faced adverse geological conditions as offshore oil and gas fields age. More exploration projects are being moved to deep water area, but these are both risky and costly,” Xie Yuhong, the group’s chief geologist, was cited as saying. He added that the volatility in global oil prices added pressure on CNOOC to rein in expenses.
Just weeks after Xi’s call in August CNOOC’s top management sanctioned plans to boost spending on risk exploration, CNOOC said on Friday, without giving details.
CNOOC Ltd, the listed arm that undertakes the exploration and production work, did not immediately comment on the report.
The company is likely to release details about its production target and capital expenditure at a strategic outlook meeting on Jan. 23.
CNOOC Ltd Chairman Yang Hua said last month that the firm would make a record investment in the next few years to boost exploration projects and reach its target.
The offshore oil and gas explorer reported 2.613 billion barrels of oil equivalent in net total reserves by 2017-end, the best seen since 2008.
In 2018, CNOOC Ltd made several domestic discoveries such as Bozhong 19-6 and Bozhong 29-6, both in the Bohai Bay area off north China.
CNOOC Ltd had set a full-year capital expenditure target of 70 billion yuan to 80 billion yuan ($10.34 billion-$11.81 billion) for 2018, but investment in the first half totalled only 21 billion yuan.
Shares of CNOOC Ltd were last up 2.05 percent at HK$12.92. ($1 = 6.7712 Chinese yuan) (Reporting by Meng Meng in Beijing and Chen Aizhu in Singapore, Editing by Sherry Jacob-Phillips and Subhranshu Sahu)