CNOOC Plans to Spend $12-14B to Develop Domestic, Overseas Assets

China National Offshore Oil Corporation revealed Wednesday that it plans to spend between $12 billion to $14 billion this year, as the company's search for oil and gas resources move deeper offshore and further aboard. CNOOC's capital expenditure budget for last year was between $9.3 billion to $11 billion.

While CNOOC is prepared to inject more funds into its offshore exploration and development projects, the company does not expect a larger expenditure budget to translate into a higher production volume. For this year, CNOOC is targeting a net production volume of 338 million to 348 million barrels of oil equivalent, slightly lower than its 2012 target which was set at 341 million to 343 million barrels of oil equivalent.

Commenting on the company's expenditure and production targets for this year, CNOOC's CFO Zhong Hua said: "In an environment of generally rising costs for the industry, the company will continue to adhere to prudent financial policies and strict cost controls. At the same time, the company will support aggressive capital expenditure plans [which can bring about] production and reserves growth."

Detailing its expenditure budget, CNOOC said in a statement that it expects to drill some 140 offshore exploration wells, acquire 9,569 miles of 2D seismic data and 9,575 square miles of 3D seismic data.

The company maintains its 2011/15 compounded annual growth target of 6 to 10 percent, and 100 percent reserve replacement aim.

CNOOC's budget disclosure follows closely on the heels of its announcement made on Monday, which states that the company will extend the closing date of its 15.1 billion takeover of Nexen by 30 days to March 2, 2013. According to statements from both CNOOC and Nexen, the takeover still lacks regulatory clearance from the United States.

In December last year, Canada approved CNOOC's proposed acquisition of Nexen, clearing a major hurdle for the Beijing-based energy giant in completing what would be China's biggest ever foreign acquisition. It is also the most ambitious bid by a foreign government-owned entity so far to enter North America's booming energy industry.

As part of the acquisition, CNOOC will make Calgary the head office of its North and Central American operations. This office will oversee the operation and growth of Nexen's assets in North and South America, Europe and West Africa and CNOOC's portfolio in Canada, the United States and Central America.