China inks deals with Shell, oil majors

By BLOOMBERG

HONG KONG • China signalled its openness for business with a raft of deals that’ll give oil majors including Royal Dutch Shell plc new opportunities to develop fields in partnership with the nation’s biggest offshore explorer.

China National Offshore Oil Corp (CNOOC) said in Beijing yesterday that it had inked oil and gas (O&G) accords with nine firms. The signing ceremony followed President Xi Jinping’s address to party cadres marking 40 years of reform and broadly underlining the nation’s commitment to global trade.

The agreements cover 64,000 sq km in the Pearl River basin, to a depth of up to 3,000m. In addit ion to the Netherlands- based Shell, France’s Total SA and US-based Chevron Corp were also awarded parcels. All three majors hold existing production sharing contracts (PSCs) with CNOOC.

The other firms involved are: ConocoPhillips, Equinor ASA, Husky Energy Inc, Kuwait Foreign Petroleum Exploration Co, Roc Oil Co Ltd and SK Innovation Co Ltd.

“It’s no coincidence that CNOOC made the statement a couple of hours after Xi’s speech,” said Tian Miao, a Beijing-based analyst at Everbright Sun Hung Kai Co Ltd. “It’s only reasonable to assume this is one of the real actions China is taking to show the world it’s willing to open businesses to the whole world.”

CNOOC has signed more than 200 PSCs since its inception in the early 1980’s, even as it has increasingly relied on its own resources to tap deep-water projects in Chinese waters — most recently the giant Lingshui 17-2 gas field in the South China Sea.

The company has promised to increase spending and raise output, heeding Xi’s call for enhanced energy security as imports grow and the nation contends with the US over trade.

“The agreements will facilitate the establishment of a long-term and stable cooperation, and share the development opportunities to a certain extent in the Strategic Cooperation Areas, creating conditions for the final signing of contracts,” CNOOC’s listed unit said in a statement.

At the ceremony, chairman Yang Hua said the company’s aim is to boost output to two million barrels of oil equivalent a day by 2025, from about 1.3 million last year, and that agreements with foreign companies could extend beyond upstream ventures in China to broader cooperation in other geographies. He also said the government is studying policies to support exploration and development of offshore O&G, and that “the sector will open wider to international players going forward”.

CNOOC’s shares fell 4.1% to HK$12.16 (RM6.48). They are up 8.4% this year.

Xi’s address in the capital disappointed those hoping for specific policies to counter a slowing economy and show the nation’s intent to free up its markets. Instead, the president focused more on the accompl ishments of the nation’s Communist Party.