CNOOC: Rising gas price facilitates bidding abroad
Updated: 2006-01-02 10:41
The chairman of CNOOC Ltd. (CEO), China's largest offshore oil producer by
production, said Saturday he expects the domestic price of natural gas to rise
further on robust demand, giving the company more room to make higher offers in
acquiring overseas gas assets in the future.
Analysts said China, which
has been hunting upstream assets overseas since it became a net crude importer
in 1993, is moving towards narrowing the natural gas price difference against
the international prices. It makes China more competitive in bidding overseas
gas assets with other energy-hungry countries with deep pockets such as India
China National Offshore Oil
Corporation's (CNOOC) oil rigs is seen in China's Liaodong Bay of the
Bohai sea February 3, 2005.
Fu Chengyu, Chairman of CNOOC Ltd., told reporters after the shareholders'
meeting: "As the affordability of domestic users increases, which means we can
offer higher prices to buy assets overseas. It's very positive to our company."
China raised domestic factory prices of natural gas, by an average of 5% to
15% on Dec. 26, the largest adjustment since 1997. The increase is aimed at
making up for high production costs of oil companies, and providing incentive
for upstream investment.
"As China's economy is growing rapidly, our demand for energy is growing as
well, which means the prices of natural gas will also be adjusted accordingly,"
The government also said China's long-term goal is to form a complete
market-oriented price mechanism of natural gas.
In late November, Chevron Corp. (CVX) scrapped a tentative A$30 billion
agreement with CNOOC Ltd.'s unlisted parent, China National Offshore Oil Corp.,
for CNOOC to become a foundation customer in the Australian Gorgon gas project.
Chevron said the price the Chinese were willing to pay was too low.
China remains concerned over an increasing shortage of natural gas in the
next five years, caused by sharply rising demand versus limited production
Demand for natural gas is expected to grow 26% annually in the next five
years, overtaking the 17% growth rate in output, according to the National
Development and Reform Commission, the country's top economic planning agency.
The country's natural gas output in the first 11 months of this year rose
20.8% on year to 44.57 billion cubic meters.
Separately, shareholders of CNOOC Ltd. voted Saturday on whether they approve
the company modifying legal agreements with its unlisted parent, in a move that
will give the parent a right to bid for upstream overseas assets.
The changes would mean the group is likely to enjoy more government support
in negotiations and won't have to disclose information as a listed company does.
The change comes after CNOOC Ltd. withdrew in August its US$18.5 billion bid
to buy US oil and gas producer Unocal Corp. because of political pressure in the
The result of the vote will be announced Jan. 3.
Fu also said CNOOC Ltd. will stay focused on upstream operations in the near
future, and has no plan to acquire downstream assets from its parent.
China National Offshore Oil Corp. in December began construction of a
refinery in southern China, with an investment of CNY19.3 billion, which is
expected to be operational by late June 2008.
The refinery will annually produce a combined 7.3 million tons of gasoline,
diesel and kerosene, 1.5 million tons of ethylene feedstock and 800,000 tons of