Wildcat Weizhou ("WZ") 11-1N-1 was drilled on WZ 11-1N structure, in the vicinity of existing Weizhou fields. Well logging data revealed an approximately 164 feet ("50 meters") of oil zone. Songtao ("ST") 24-1-1 is also a wildcat drilled on ST 24-1 structure. The well encountered oil and gas shows, which are of geological significance.
Meanwhile, the Company also discovered oil and gas in West Madura PSC area, offshore East Java, Indonesia. Well KE 38-1, encountering 54.5 feet of oil pay and 642.5 feet of gas pay in the Kujung I carbonate, was drill stem tested to flow 935 barrels of oil and 0.34 million cubic feet of gas per day, respectively. Well logs confirmed well KE 54-1 and KE 32-1 also contained substantial oil and gas pays in the Kujung I Carbonate Formation.
CNOOC Limited holds 100% interest in both new discoveries offshore China (WZ11-1N-1 and ST24-1-1). And the Company holds a 25% interest in each of three new discoveries offshore East Java (KE38-1, KE54-1 and KE32-1).
The Company also reports that the reservoir characteristics and geological structure from some producing fields have proven more complex than expected. The difficulties are putting pressure on production and costs.
Major fields encountering challenges include QHD 32-6 and PL 19-3, both in Bohai Bay. These heavy crude fields are new to CNOOC and its partners. The development and implementation of solutions has taken some learning curve. In addition, PY5-1/4-2 in Eastern South China Sea is slower in ramping production up than budgeted.
Even though production pressure from these challenges is not expected to impact materially the Company's 2003 targets, operational difficulties will have an impact on next year's production and costs.
"Our partners and we are implementing measures to deal with these problems. And we are seeing good responses. While these problems are not uncommon and we were in the past able to make up shortfalls elsewhere, these difficulties coming together are expected to remove approximately 5-6 million BOE of production from planned 2004 targets," commented Mr. Zhou Shouwei, President of the Company.
Mark Qiu, CFO and Senior Vice President, added, "Some of these fields have higher operating cost base. Combining with the volume underperformance they are showing up in increased unit costs."
"We have taken steps to address these issues and we remain optimistic on the growing future of the Company. These problems are inherent part of the business. We will try to fix them and move forward. Costs are projected to come down again in 2005," noted Mr. Fu Chengyu, Chairman and CEO.
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