CNOOC Plans to Deposit Operating Funds in CNOOC Finance

CNOOC Limited (SEHK: 883, NYSE: CEO) said it will ask shareholders' permission to deposit some operating funds in China in a joint venture finance company formed with its parent company, CNOOC and other sister companies in the upcoming shareholders' meeting.

CNOOC Limited made an investment in the joint venture finance company, CNOOC Finance, last September (Please refer to the Company press release on 9/8/2003). As a result, it owns 31.8% of the venture. Designed as a shared treasury services company, CNOOC Finance provides a variety of treasury and finance-related services to CNOOC group companies. At the time of the investment, the Company stated the objectives of the investment were to improve and consolidate the Company's treasury function, to allow the Company to reduce treasury and finance costs and to lower risk exposure.

One way this arrangement can help reduce costs is through the low cost and speedy settlement of payments among CNOOC group companies via this vehicle. Mr. Cheng Chi, the Treasurer of the Company commented, "CNOOC group companies provide us with an array of quality and cost-competitive services vital to our E&P operation in China. We want to help keep their working capital costs down and to receive payments owed to us quickly. This vehicle and our ability to deposit money in it help realize the benefits."

Mr. Fu Chengyu, Chairman and CEO of the Company, noted, "We are asking for shareholders' permission to deposit certain funds in this vehicle to help realize synergies and cost savings of treasury operation and control risks. We are confident that the majority of shareholders will recognize the management's focus on taking advantage of every opportunity to enhance operating efficiency and shareholder value, and approve the proposal."

"As of the time of this release, the Company has no material balance deposited in this vehicle or any other CNOOC companies," stated Dr. Mark Qiu, Chief Financial Officer and Senior Vice president of the Company. "CNOOC Finance is regulated by People's Bank of China. It provides a more speedy and cost effective service to the Company to process and settle treasury and finance related transactions. We therefore consider the proposal to be in the best interest of the Company."