State-owned China National Offshore Oil Corp (CNOOC; 0883.HK, CEO.NYSE) announced Tuesday that it will produce between 275-290 million barrels of oil and bring nine new offshore production facilities online in 2010, providing a 28% annual increase in gas and crude output. This figure far exceeds earlier analyst estimates of 7-11% growth. The company also plans to boost capital expenditure to US$7.93 billion in 2010, up 29.5% year-on-year.
CNOOC’s production goals are dependent upon a forecast of US$75 per barrel – a figure slightly lower than current crude prices. However, high production goals may provide a buffer in case of peak demand and lay the groundwork for future exploration.
The company remains focused on developing domestic offshore assets, but recent overseas activity – CNOOC has acquired prospects in the Gulf of Mexico and may work with UK-based Tullow Oil on a pipeline and refinery in Uganda – suggests that rising output demands will lead it to pursue international assets more vigorously.
CNOOC’s increased appetite and overseas aspirations will make global energy exploration and development efforts that much more intense, especially for its fellow state-owned enterprises. CNOOC’s sister company, China Oilfield Services (2883.HK, 601808.SH) is likely to the primary beneficiary of the expected expansion, providing necessary equipment and services as output increases.