October 24, 2019 / 10:12 AM / a month ago

China's CNOOC says COSCO sanctions have impact but oil and gas output unaffected

BEIJING (Reuters) - CNOOC, China’s largest offshore oil and gas producer, on Thursday said it would be affected by U.S. sanctions on its COSCO shipping firm but there would be no impact on its oil and gas production.

“(The sanctions) will have some impact on our business when shipping oil and gas from overseas oilfields back to China...But I am sure the company will come up with solutions,” said Xie Weizhi, chief financial officer at CNOOC Ltd (0883.HK), the listed arm of CNOOC, at a media briefing on Thursday.

“COSCO is just a transportation company...And the sanctions will not affect our oil and gas production,” he added.

Reuters reported two weeks ago that CNOOC was looking to charter liquefied natural gas tankers to replace ships it had hired from COSCO Shipping Tanker (Dalian), which has been sanctioned by the United States for allegedly transporting Iranian oil.

Earlier on Thursday CNOOC Ltd reported a 27.9% jump in capital spending in the third quarter to 19.53 billion yuan ($2.76 billion), according to a company statement filed to the Hong Kong Stock Exchange, as Beijing pushes to boost oil and gas exploration and production.

“We are not planning to adjust our 2019 capital expenditure target of 70-80 billion yuan and are confident of meeting it,” said Xie at the briefing, adding that the company also expected to reach the upper limit of, or exceed, its annual output target of 480 million barrels of oil equivalent.

CNOOC’s global crude oil production in the July-September period reached 100.3 million barrels, while natural gas production was 142.5 billion cubic feet, compared with last year’s 91.1 million barrels and 131.7 billion cubic feet, respectively.

Oil and gas sales, however, only managed to tick up 0.8% to 48.34 billion yuan as higher production was offset by a drop in energy prices.

CNOOC said it had drilled 19 appraisal wells, among which, Kenli 6-1 in the Bohai Bay area was expected to be a mid-sized oil and gas structure.

Meanwhile, production at three of six new projects that are scheduled to be launched this year is underway. The remaining oilfields - Bozhong 34-9, Caofeidian 11-1/11-6 and Wenchang 13-2 - are undergoing offshore commissioning.

In September, CNOOC said it expected its major deepwater gas field Lingshui 17-2 in the South China Sea to start its first gas production at the end of 2021, and planned to expand development at existing fields such as Dongfang, Yuedong and Yacheng.

The company’s average-realised oil prices were $60.89 per barrel in the third quarter, down 14.9% from last year. Natural gas sales prices fell 8.8% to $5.7 per thousand cubic feet.

At the press briefing, Xie also confirmed that parent company, CNOOC Group, had announced Wang Dongjin will be its new chairman, following Yang Hua’s move to Sinochem Group in September.

Wang is currently general manager at CNOOC Group.

Reporting by Muyu Xu and Dominique Patton, Editing by Sherry Jacob-Phillips and Kirsten Donovan

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