CNOOC plans to boost output over next three years while fostering energy transition initiatives

Chinese oil and gas giant CNOOC Limited has revealed its 2022 Business Strategy and Development Plan, which includes plans to increase oil and gas production in the next three years while advocating for and encouraging green energy transition initiatives.

CNOOC on Tuesday revealed a summary of its business strategy and development plan for the year 2022, explaining that its targeted net production for 2022 was 600 million to 610 million barrels of oil equivalent (BOE), of which, production from China and overseas would account for approximately 69 per cent and 31 per cent, respectively.

Xu Keqiang, CEO of CNOOC, remarked: “In 2022, we will continue to give priority to profit generation, strive to increase oil and gas reserves and production and promote the green energy transition initiatives.”

It is worth reminding that CNOOC launched the country’s first offshore carbon capture and storage (CCS) project in the South China Sea last year in August to pursue energy transition goals and reach its net-zero targets.

Located at the CNOOC’s Enping 15-1 oilfield in the Pearl River Mouth Basin of the South China Sea, the CCS facilities are expected to enable the storage of more than 1.46 million tonnes of carbon dioxide. The company plans to reinject as much as 300,000 tonnes of CO2 per year into seabed reservoirs.

In its latest update concerning plans for 2022, CNOOC explained that the firm’s net production for 2021 was expected to be approximately 570 million BOE, while its net production targets for 2023 and 2024 were estimated to be 640 million to 650 million BOE and 680 million to 690 million BOE, respectively.

Chinese giant’s total capital expenditure for 2022 is budgeted at RMB 90 billion (over $14 billion) to RMB 100 billion (over $15.6 billion), while the capital expenditures for exploration, development, production and others will account for approximately 20 per cent, 57 per cent, 21 per cent and 2 per cent of the total capital expenditure, respectively.

The firm plans to drill 227 offshore exploration wells this year along with 132 onshore unconventional exploration wells and acquire approximately 17 thousand square kilometres 3-Dimensional (3D) seismic data.

Furthermore, CNOON expects to bring 13 new projects on stream in 2022, including Bozhong 29-6 oilfield development, the development of Kenli 6-1 oilfield Block 5-1, 5-2, 6-1, Enping 15-1/10-2/15-2/20-4 oilfields joint development and Shenfu South gas field development in China, Liza Phase II in Guyana and 3M – MDA, MBH, MAC – project in Indonesia.

In addition, to ensure shareholders’ return from 2022 to 2024 – subject to the approval by the general meeting of shareholders on the proposed dividends for each year – the expected annual payout ratio of the company will be no less than 40 per cent and the annual absolute dividend is expected to be no less than HKD 0.70/share – tax inclusive – or $0,089/share.

It is worth noting that CNOOC plans to pay a 20^th-anniversary special dividend in addition to the 2021 year-end regular dividend, as 2021 marks the 20th anniversary of the company’s listing. The firm will appropriately implement the share buybacks in 2022 subject to the authorization granted at the general meeting of shareholders, according to CNOOC’s statement.

“While enhancing our capability to create more values, we will implement more stable and transparent dividend policy to share the achievements of the company with shareholders and ensure that they receive reasonable returns,” concluded Keqiang.

To remind, CNOOC brought several projects on stream in 2021. In August last year, the firm brought online three oilfields located in Chinese waters. First came the Liuhua 21-2 oilfield in the eastern South China Sea, then the Luda 6-2 oilfield in Liaodong Bay of Bohai Sea, and finally the Bozhong 26-3 oilfield expansion project.

The following month, the company started production at the Bozhong (BZ) 19-4 oilfield comprehensive adjustment project located offshore China and made a large-sized discovery in Kenli 10-2 oilfield in Bohai Bay. The drilled appraisal well was tested to produce approximately 569 barrels of oil per day.

CNOOC also started production from the Lufeng oil fields regional development project – located offshore China – in November 2021 and fired up the Buzzard Phase II development a few days later.

Buzzard Phase II is located offshore in the UK sector of the North Sea and is expected to reach its peak production of approximately 12,000 barrels of oil equivalent per day in 2022, increasing Buzzard’s production to 80,000 BOEPD in total.