China Oilfield eyes new rigs to cope with rising offshore China demand
Singapore (Platts)--31Jan2013/629 am EST/1129 GMT
China National Offshore Oil Corp's drilling subsidiary China Oilfield
Services is actively planning new vessels to cope with higher demand offshore
China, the company said in its annual strategy preview on Thursday.
Its total capital expenditure this year will range from Yuan 4 billion
to 5 billion ($643 million-$804 million), similar to its planned budget for
About 62% of its capital expenditure this year will be focused mainly on
construction of new vessels in its drilling services segment. The remainder
will be geared towards well completions, geophysical and marine support and
transport services, COSL said.
Spending on newbuild vessels includes the COSL Prospector
semisubmersible rig capable of drilling in water depth of 1,500 meters. It is
currently being constructed at Chinese yard CIMC Raffles in Yantai. In
addition, COSL has commissioned two jack-up drilling rigs and a second 1,500
m semisubmersible rig. All the newbuilds are expected to be operational from
the second half of 2015 at the earliest, the company said.
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The company currently operates over 30 vessels, including seven
COSL's capacity addition is proof that there is strong demand from
activity in the South China Sea, Nomura Research said in a note Thursday.
"Although many people cast doubt on the deepwater progress of [the]
South China Sea owing to geological uncertainties, technology gaps and
sovereign disputes, demand does look very solid because [COSL is actively
adding] new drilling capacity for this region," Nomura said.
The planned expansion comes after it purchased the 1,400 m Nanhai VIII
semisubmersible rig for drilling work offshore China in September.
In the first quarter of last year, COSL also started operating the
Haiyang Shiyou 981 deepwater semisubmersible rig. The rig is capable of
drilling in water depth of 3,000 m and was the first such vessel commissioned
by CNOOC. It drilled at least three deepwater wells in the South China Sea
last year although CNOOC has not revealed the results of the drilling.
COSL said over 80% of its rig contracts for this year have been secured,
with the total volume of work remaining steady from 2012.
For the six months ended June 2012, revenue offshore China made up 68%
of COSL's total earnings.
CNOOC, which is COSL's largest customer, said Wednesday that its capital
expenditure this year will rise by 31%-52% year on year to $12 billion-$14
Analysts at Bernstein Research said in a note Thursday that of this
amount, CNOOC's domestic expenditure will be around $7.7 billion -- up 25%
from 2012 but lower than the 35% growth seen over 2011-2012.
CNOOC plans to drill 140 exploration wells this year, the bulk of which
will be offshore China. COSL said CNOOC's projected drilling plan secures its
own work volume for the "foreseeable future."
CNOOC's chief financial officer, Zhong Hua, on Wednesday also
highlighted the amount of work needed on existing fields offshore China,
saying that despite 10 new domestic projects expected online this year, the
company's output growth in 2013 would likely be just 2.3% year on year, and
most of the increase would come from abroad.
"Clearly the underlying declines of the existing aging fields are so
severe that they completely offset the contributions from the new smaller
fields," Gordon Kwan, head of energy research at Mirae Asset Management, said
in a report Thursday.
--Song Yen Ling, email@example.com
--Edited by Jonathan Fox, firstname.lastname@example.org