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Chinese Company Hails Breakthrough Oilfield Discovery Amid Hopes to Shake Off Reliance on Imports

Sputnik News

13:53 GMT 30.06.2020

China has been hoping to lessen its dependence on oil and gas imports amid a global economy battered by the impact of the coronavirus pandemic, plummeting demand and nosediving crude prices.

The China National Offshore Oil Corporation Limited (CNOOC) announced on 30 June in a press release that it had made a significant oilfield exploration breakthrough.

The Huizhou 26-6 structure, located in the Huizhou Sag in the Zhu1 Depression of Pearl River Mouth Basin in the Eastern South China Sea was tested to produce around 2,020 barrels of oil and 15.36 million cubic feet of gas per day.
A statement said that well HZ26-6-1 was drilled and completed at a depth of 4,276 meters, encountering oil and gas pay zones with a total thickness of approximately 422.2 meters.

The find is anticipated as the first mid-to-large sized condensate oil and gas field in the shallow waters of Pearl River Mouth Basin.

"The successful exploration of Huizhou 26-6 oil and gas structure is the first time that the company has achieved commercial and highly productive oil and gas flow in buried hill exploration in Eastern South China Sea, marking a significant exploration breakthrough in Paleogene and buried hill complex oil and gas reservoir in Pearl River Mouth Basin, and further proving the huge exploration potential in this new field," says CNOOC.

CNOOC's new discovery has been hailed as potentially feeding into China's ambitions to boost its domestic oil and natural gas production.

The Asian giant has been seeking a way to reduce its reliance on imports of oil and gas, tasking companies such as state-controlled CNOOC with bringing forward exploration work to replenish domestic reserves.

As the global oil industry has been left reeling from the major impact of the coronavirus pandemic, that has driven world crude demand to plummet and prices hit record lows, Chinese state oil majors have been obliged to slash cut capital expenditures for 2020.

The oil price collapse, state analysts, has hit national oil companies in Asia such as CNOOC, PetroChina and China Petroleum & Chemical Corporation (Sinopec) the hardest. However, in the longer term, this is also underscored as a potential boon, as the companies are prioritizing increase of domestic oil and gas production over overseas operations.

According to Fitch Ratings, China's drive to boost energy security via hiked domestic production will unleash higher investments from the Chinese oil giants.

As it affirmed its A+ rating on CNOOC Limited, with a "stable" outlook, Fitch said last week that the company "plays a strategic role in safeguarding the country's energy security via its offshore upstream activities, both domestically and overseas."

While Fitch's oil and gas price deck forecasts CNOOC's revenue and Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) as weak for 2020, due to the price collapse, a gradual recovery is anticipated from 2021.


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