By Wang Ying
Nov. 24 (Bloomberg) -- Cnooc Ltd., China's top offshore oil producer, and its partners may spend about 200 billion yuan ($29 billion) to develop fuel deposits in the South China Sea in the nation's biggest push to tap reserves off the country's 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 partners.
China, the world's second-biggest oil user, is expediting projects including gas pipeline and oil refineries to spur growth as global economies sink into recession. Cnooc will drill twice the current depth for fuel as companies including Royal Dutch Shell Plc delay worldwide ventures after the credit crisis contributed to oil prices falling 66 percent from its July record.
``The company will maintain its exploration budget for the South China Sea next year as the region hasn't seen any `big impact' from the credit crunch,'' 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 South China Sea.''
The region, covering 3.5 million square kilometers, stretches from Singapore to the Straits of Taiwan. Rising energy demand in the world's fourth-biggest economy is prompting state-controlled Cnooc to boost exploration in an area, about a third of the size of China, where nations including Vietnam and the Philippines have laid territorial claims.
Oil Disputes
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.
Geological fuel reserves in the deepwater fields of the South China Sea may reach 22 billion barrels of oil equivalent by 2020 and the overall annual output may rise to 350 million barrels, Luo said. China may consume 8.2 million barrels of oil a day in 2009, according to the International Energy Agency, the Paris-based adviser to 28 oil-consuming nations.
The country will overtake the U.S. as the world's biggest oil and gas consumer in about five years, Shell said in September. China's demand for natural gas is ``huge'' in the coastal provinces of Guangdong, Fujian and Zhejiang, said Li.
Cnooc and its future partners aim to drill up to 3,000 meters deep in the offshore area by 2020, compared with the current maximum depth of 1,485 meters, said Luo. ``Deepwater is a key area for future incremental reserves,'' he said.
Current Partners
``The actual spending for the South China Sea will depend on other variables including the price of raw materials such as steel,'' said Li.
Cnooc's current exploration partners in the South China Sea include Devon Energy Corp., Husky Energy Inc. and Anadarko Petroleum Corp., Luo said. The Chinese explorer will invest $1.04 billion in exploration in 2008 as it aims to at least replace any reserves it depletes each year, Cnooc said in January.
The company plans to produce between 195 million and 199 million barrels of oil equivalent this year, compared with last year's output of between 169 million and 171 million barrels, it said then.
To contact the reporter on this story: Wang Ying in Beijing at ywang30@bloomberg.net.
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