China National Petroleum Corp. (
CNPC) Wednesday
established an offshore oil engineering subsidiary. It is an
important step for China's largest oil producer, helping it boost
the exploitation of oil in China's waters.
The new subsidiary, China National Petroleum Offshore
Engineering Co. Ltd. (CNPOEC), could also expedite CNPC's overseas
expansion by tapping into foreign countries' offshore reserves.
CNPC yesterday created the engineering company by consolidating
the drilling, construction and engineering assets and design
institutions of two of its subsidiaries -- Liaohe Oil Exploration
Bureau and Dagang Petroleum Group.
The engineering firm will mainly conduct offshore well-drilling,
engineering, design and maintenance of offshore oil production
platforms.
Up to now, CNPC has explored and developed oil production on
land and in shallow waters no deeper than five meters. China
National Offshore Oil Corp. (CNOOC), the
nation's third largest oil producer, dominates offshore oil
production.
But earlier this year PetroChina, CNPC's subsidiary, clinched
its first license to search for oil in the South China Sea. The
government hopes the move will promote oil exploitation offshore,
helping increase domestic oil supply.
At present, CNPC produces about 1 million tons of oil in shallow
waters in Bohai Bay, less than 1 percent of its total production.
With more effort pouring into offshore exploration, CNPC plans to
pump out 4 million tons of crude in Chinese waters by 2010.
"The set-up of CNPOEC is a strategic step for CNPC to speed up
offshore oil exploration," Liu Haisheng, chairman of CNPOEC, said
yesterday at the launching ceremony.
The company has already made "surprisingly encouraging"
discoveries in Liaohe, Dagang and Jidong in the Bohai Bay area
recently.
Shi Lin, general manager of CNPOEC, said the launch of his
company is also significant for CNPC's drive for overseas expansion
as it negotiates to tap offshore oil in foreign countries.
Potential reserves could be "much larger" than CNPC's domestic
offshore oil production, Shi says.
The establishment of CNPOEC may threaten the dominance of Hong
Kong-listed CNOOC Engineering in the offshore oil engineering
service business in China. CNOOC Engineering now carries on most of
the engineering service work of its parent company CNOOC.
But Shi said there was enough demand for both companies. "It is
not a problem of competition, but a problem of too large a market.
We cannot finish our current work for at least the next three or
five years."
Compared to onshore exploration, China's offshore oil has
remained largely untapped. It is estimated that more than 80
percent of offshore oil reserves have not yet been identified.
China's offshore oil production reached 27 million tons last
year, representing about 15 percent of total production. Most of
the oil was produced by CNOOC and its foreign partners.
(China Daily November 4, 2004)
