Cnooc to cut spending and output

HONG KONG: Cnooc Ltd, China’s biggest offshore oil and gas producer, plans to cut spending and reduce production this year amid oil’s plunge below US$30 a barrel.

The Beijing-based explorer would decrease capital expenditure of “no more than” 60 billion yuan (US$9.1bil) this year from a target of as much as 80 billion yuan for 2015, while producing 470 million to 485 million barrels of oil equivalent, it said in a statement to the Hong Kong stock exchange yesterday.

Cnooc produced an estimated 495 million barrels of oil equivalent last year.

Brent crude has fallen more than 70% the past 18 months as Organisation of Petroleum Exporting Countries effectively abandoned output limits amid a global surplus.

The price collapse has delayed US$380bil worth of investment on 68 major upstream projects, according to industry consultant Wood Mackenzie Ltd, and has forced global producers from BHP Billiton Ltd to BP Plc to write down the value of assets and fire workers.

“With the decrease in capital expenditures, the company expects to achieve the whole-year targets by cost control and efficiency enhancement,” Cnooc said in the statement.

Cnooc shares closed up 4% to HK$7.01 in Hong Kong yesterday. The stock dropped 23% in 2015, compared with a 7.2% decline in the city’s benchmark Hang Seng Index.

Brent oil rose as much as 3.5% to US$29.54 a barrel yesterday in London. Prices dipped below US$28 on Monday after international sanctions on Iran were lifted, paving the way for increased oil exports, worsening a global oversupply.

The explorer planned to start four new projects this year while drilling 115 exploration wells, it said. The company is targeting production of 484 million barrels of oil equivalent in 2017 and 502 million in 2018. — Bloomberg