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CNOOC spending 200b yuan to tap deposits

(China Daily/Agencies)
Updated: 2008-11-25 14:31

CNOOC Ltd and its partners may spend about 200 billion yuan to develop fuel deposits in the South China Sea in the nation's biggest push to tap reserves off the coast.

The investments between next year and 2020 include an estimated 15 billion yuan by parent China National Offshore Oil Corp to build deepwater drilling equipment, Luo Donghong, chief development engineer at CNOOC's Shenzhen unit, told reporters and analysts on Nov 22.

He didn't name the companies that will partner China's biggest offshore oil producer.

The company will drill twice the depth of its existing wells off the coast of China as its global rivals cut spending after oil prices fell 66 percent from its July record.

"Huge potential lies untapped for the company in the South China Sea, which is largely unexplored," Wang Aochao, a Shanghai-based analyst with UOB-Kay Hian Ltd, said by telephone yesterday.

The South China Sea, covering 3.5 million square kilometers, stretches from Singapore to the Straits of Taiwan and is a third of the size of China.

In July, the Chinese government opposed a plan by Exxon Mobil Corp, the world's biggest oil company, to explore for fuel in the area with Vietnam, saying the project marks a breach of its historical claim to the region.

CNOOC climbed 2 percent to close at HK$5.16 in Hong Kong trading, while the benchmark Hang Seng Index dropped 1.6 percent.

China, the world's second-biggest oil user, is expediting projects including nuclear power plants, gas pipelines and oil refineries to help stimulate the domestic economy and meet future energy demand. The country will overtake the US as the world's biggest oil and gas consumer in about five years, Royal Dutch Shell Plc said in September.

"The company will maintain its exploration budget for the South China Sea next year," Li Fanrong, general manager of the unit of the Beijing-based company, said in the southern city of Shenzhen. "The investment is only a rough estimate that reflects the immense potential of oil and gas reserves in the area."

Geological fuel reserves in the deepwater fields of the South China Sea may reach 22 billion barrels of oil equivalent by 2020 and overall annual output may rise to 350 million barrels, Luo said.