Saudi Aramco is jostling with Apple once again for the title of the world’s most valuable company, helped by oil prices that have soared 60% since last year on higher demand and the spillover effect of the disruption in energy markets caused by the Russian invasion of Ukraine.
That’s not a conflict that gets much mention in the Chinese press, of course, which has been busier this month celebrating the achievements of China National Offshore Oil Corporation, or CNOOC, after news that oil has started to flow from the Mero field in the Santos Basin, a vast area of the Atlantic around 190 miles off the coast of Brazil.
CNOOC and PetroChina – another of the country’s state-controlled energy giants – are both partners in the project, which is slated to produce 180,000 barrels of crude a day.
Projects like these have also been presented as evidence of a broader effort from the Chinese energy majors to shift away from assets in Western markets, because of concerns that they could become targets of cross-border sanctions.
Yet CNOOC executives have denied that this is the plan, saying there isn’t an ambition to exit any particular region. They have also avoided comment on rumours that China’s energy giants are in the market for the Russian assets now being divested by their Western rivals. Shell, ExxonMobil and BP have all announced their intentions to sell their stakes in Russian oil and gas projects in recent weeks but CNOOC has said nothing official about bidding for them, beyond an acknowledgment from its chief financial officer that it is “closely monitoring” events.
News of the operational launch at the Mero field hardly represents a Chinese takeover of the Brazilian oil fields either: CNOOC’s stake in the project is significantly smaller than those of its international peers Petrobras, Shell and TotalEnergies.
It’s probably more instructive to see the project as another step into the deeper, more difficult exploitation of the pre-salt fields that account for about a third of the world’s oil reserves – also a major focus for CNOOC, which has taken stakes in similar projects, including the Buzios field in the same basin.
Pre-salt discoveries are oil-rich offshore reserves trapped below thousands of metres of layered salt and post-salt sediments. Accessing them via floating production, storage and offloading units is challenging: apart from the relative isolation of many of the deepwater discoveries, the thick salt that traps the hydrocarbons can be difficult to drill through.
As China’s largest producer of offshore oil and gas, CNOOC wants to make a name for itself as a specialist in the field, bolstered by funds made available by an initial public offering on the Shanghai stock exchange last month that raised $4.4 billion (the sale came after the company left the New York stock exchange last year, when Washington added CNOOC to a trade blacklist because of its alleged connections to China’s military).
Expertise in deepwater drilling could also pay dividends in Chinese waters as part of a programme in which the government hopes to reduce the country’s reliance on international oil. Imports of crude fell 5.3% last year to 513 million tonnes, the China Petroleum and Chemical Industry Federation reports, although the Chinese still relied on foreign sources for 72% of their oil supply.
CNOOC has also been championing its progress in other areas. Shenhai-1 – China’s first self-operated deepwater gas field facility, which began operations last June – went past 1 billion cubic metres of gas production in February. And last month there was more fanfare for Haiji-1, a 300-metre deepwater ‘jacket’ built by the company that has been deployed to the sea floor to support drilling for oil off the coast of Guangdong.
CNOOC’s latest earnings announcement at the end of April reported net income of Rmb34 billion ($5.1 billion), well above market expectations. Sales of oil and gas came in at just over Rmb82 billion in the first quarter, jumping 70% on the same period last year on higher prices and sales volumes. Investors were cheered by an unexpectedly good dividend payout too.
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