Chinese oil firm to invest $14.5b for offshore reserves

Chinese oil firm to invest $14.5b for offshore reserves

BEIJING (AFP): China National Offshore Oil Corp. (CNOOC), which plans to sell shares abroad early next year, has decided to invest 120 billion yuan (US$14.5 billion) on tapping offshore oil reserves in the next five years, state media reported on Tuesday.

The company, the country's largest offshore oil producer, hopes the investment will help it reach its goal of an annual oil and gas output of 40 million tons in 2005, up from 20 million tons now, the China Daily said.

"China will heavily rely on the oil reserves in its offshore waters in the future," said Zeng Hengyi, CNOOC's deputy general engineer.

Industry sources have said CNOOC will be a key factor in China's development because growth in the country's oil and gas production will primarily depend on the company's output during the 10th Five-Year Plan, which runs from 2001 to 2005.

China, a net importer of oil since 1993, is desperate to find new domestic energy sources.

It became clear that it can no longer insulate itself from volatility in the global markets when earlier this year international oil prices rose to 10-year highs, forcing a hike in Chinese oil prices as well.

Last year, China's imported crude accounted for 20 percent of the domestic market, and the reliance on imports appears set to increase this year.

In the first four months of 2000, China bought 22.7 million tons of crude oil from abroad, more than double the amount during the same period in 1999.

Still, China's dependence on imported oil is considerably smaller than its neighbors, such as Thailand and the Philippines, which import 55 and 60 percent of their oil respectively, according to the Asian Development Bank.

CNOOC itself will come up with about 75 percent of the money it plans to invest in offshore oil exploration over the next five years, while the rest will come from foreign sources, the China Daily said.

CNOOC's foreign partners will shoulder the entire responsibility for exploration and will be in charge of well- drilling during the exploration period.

But if any valuable reserves are found CNOOC will automatically be given a 51 percent share, the paper said.

The Royal Dutch/Shell oil company said earlier this month it was paying up to $300 million for 20 percent of new stock issued by CNOOC.