CNOOC's target net production volume offshore China in 2004 is approximately 118-123 million BOE (barrels of oil equivalent) vs. an estimated 108 million BOE in 2003. Its Indonesian unit is expected to report a net entitlement volume of approximately 22 million BOE (at WTI US$23.7/bbl). The unit's reported volume changes in a reverse direction by approximately 500,000 BOE for every dollar change in oil prices due to Indonesia PSC structure.
CNOOC is committed to long-term production growth albeit problems at two of the offshore China fields, QHD 32-6 in Bohai Bay and PY5-1/4-2 in Eastern South China Sea, are putting pressure on 2004's production growth rate. Improvements in these fields will help the Company achieve the upper end of the target. Despite the problems, the Company continues to strive for production target set earlier for 2005.
The Company's 2004 capital budget supports the commitment and reflects the magnitude of potential future production step-ups. The exploration budget in 2004 is expected to approximately double that of 2003 estimated expenditure to reach US$270-290 million. The exploration program is designed to achieve a reserve replacement rate of 180% in 2004.
The development capital expenditure in 2004 is budgeted at US$1,600 -1,700 million. Thirteen development projects are expected to come on stream between 2004 and 2005, of which six are expected to be completed in 2004, the most planned for completion in a certain year ever in the history.
Natural gas production and sales, as the new growth engine for CNOOC, will continue to be one of the Company's core business priorities. Completion of acquisitions of NWS and Gorgon equity interests, which, together with the Tangguh project, will supply China's pioneer LNG terminals. CNOOC's grip on China's expanding LNG infrastructure could further strengthen the Company's dominance in coastal China natural gas market. CNOOC will continue to maintain its cost competitiveness. Even though offshore China production costs in 2003 and 2004 are experiencing upward pressure, proactive measures are in place to bring costs further down. Lifting costs are expected to step down materially in 2005.
"CNOOC Limited's winning strategies remain unchanged. We will continue to focus on achieving production growth, adding reserves through exploration and opportunistic acquisitions, developing and expanding natural gas business to deliver solid returns to our shareholders. The fundamentals of the company remain healthy and the management is confident of the growing future of the company," commented Mr. Fu Chengyu, Chairman and Chief Executive Officer of the Company.
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