Cnooc Aims for Bohai Bay to be China's 2nd Largest Oil Field

BEIJING Oct. 15, 2007 (Dow Jones Newswire)

Chinese offshore oil producer Cnooc Ltd. (CEO) aims to increase production at Bohai Bay to make it the country's second-largest oil field in terms of output within five years, company officials said.

The offshore hub in northern China produced 98.1 million barrels of oil equivalent last year, and must double output to edge out Shengli oil field in eastern China before it can claim second spot, said Chen Bi, vice-president of Cnooc Ltd. and general manager of the Tianjin unit that oversees the Bohai Bay operations.

The jump in output at Bohai would be achieved through a combination of new oil fields coming on stream, notably the Peng Lai field from 2008, and enhanced output techniques. The company expects production volume to rise to 99 million barrels of oil equivalent in 2007 before the pace of growth accelerates.

The number of producing oil fields in Bohai is likely to jump from its current 28 over the next few years, said Gao Dongsheng, general manager of the development department at Cnooc's Tianjin unit.

At the same time, the rate of decline of crude output at older fields is targeted to slow to 7%-10%.

"Bohai is expected to exceed (production at) Shengli field to become the second-largest field in China," Gao said.

The onshore Shengli oilfield is owned by China Petroleum & Chemical Corp. (SNP), also known as Sinopec Corp. The biggest oilfield in China is PetroChina Co.'s (PTR) Daqing field in Heilongjiang province in the northeast.

China's oil companies are investing heavily in exploring for oil and combating production declines at older fields to offset part of the rise in imports, which are approaching 50% of the country's crude oil needs.

According to figures presented by Cnooc, Bohai Bay is estimated to have original oil in place of 3 billion metric tons compared with 4.4 billion tons at Shengli, but less of the oil at Bohai has been tapped due to the complexity of offshore oil exploration.

Original oil in place is defined as the total estimated oil and gas in discovered reservoirs using seismic drilling, logging and test data. Recoverable reserves are usually sharply lower, in the range of 20% to 40%, depending on the structure of the fields.

The positive outlook for faster production growth in Bohai is mainly due to U.S. oil major ConocoPhillips (COP) preparing to bring the second phase of the Peng Lai 19-3 oil field on stream next year. Cnooc anticipates that PL 19-3, which is the largest integrated offshore oil field in China, will have peak production of 165,000 barrels a day.

Cnooc currently has 12 oil fields under development in Bohai Bay, including PL 19-3, and a further 13 being assessed for the scale of their reserves. In August, the company announced that JZ25-1 was a significant discovery with the potential for peak annual volumes of more than 6 million barrels of crude oil and 5 billion cubic meters of natural gas.

Among the techniques that Cnooc intends to adopt to enhance oil recovery in Bohai is polymer injection, which could help boost reserves at the SZ36-1 field by 57 million barrels, or a 7.7% increase in the recovery rate.

In addition, Cnooc said it is considering "water flooding" techniques to force more oil out through wellheads, and drilling fishbone wells that can produce three times as much oil as a single vertical well.

PetroChina's Nanpu find announced earlier this year is also located in Bohai Bay. It is China's largest oil find for more than 30 years, according to officials at China's number-one oil company by output.

China's Ministry of Land and Resources certified in August that the Nanpu block contains proven oil reserves of 445 million tons and economically recoverable reserves of 86.6 million tons, which is equivalent to 632 million barrels.

Copyright (c) 2007 Dow Jones & Company, Inc.


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