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Oil & Gas Exploration and Development


CNOOC always puts oil & gas exploration and development high on its agenda in an innovative manner to stabilize and further its business development. Guided by the idea of “seeking for new medium and largescale oil & gas fields”, CNOOC makes extensive breakthroughs in the oil & gas exploration both at home and abroad, and takes the initiative to fulfill the responsibility of supplying oil & gas so as to continuously satisfy people’s ever-increasing consumption demands.

Exploration

In 2016, the company strengthened the integration of exploration and development. We have prioritized the exploration of offshore China and struck a balance between mature areas, rolling areas and frontier areas. Overseas, we focused on high-quality blocks and conventional oil and gas. The company strengthened value-driven exploration philosophy and mainly focused on searching for mid-to large-sized oil and gas fields while reducing the proportion of high risk and high cost wells. In addition, the company continued to maintain a reasonable proportion of exploration investment so as to ensure long-term sustainable development with a relatively high level of exploration activities. Due to the significant decrease in international oil prices, the reserve replacement ratio for the company is 8% for 2016. Excluding economic revision, the reserve replacement ratio for the company is 145%.

In offshore China, the exploration activities of the company remained at a high level and a total of 115 exploration wells were drilled. In addition, the company completed 17 unconventional wells onshore China. A total of 2,471 kilometers of 2D Seismic Data was acquired independently; a total of 11,347 square kilometers of 3D Seismic Data was acquired independently and through PSC. The company made 12 new discoveries and successfully appraised 19 oil and gas structures in offshore China. The success rate of independent exploration wells in offshore China is 52-69%. In 2016, the company continued to implement a proactive exploration strategy in offshore China, resulting in successful achievements including the followings:

Firstly, we effectively completed the appraisal of four mid-to-large sized oilfields including Kenli 16-1, Caofeidian 12-6/6-2, Penglai 20-2/20-3 and Liuhua 21-2.

Secondly, progress was made in the deepwater natural gas exploration of Qiongdongnan Basin, with the structure of Lingshui 25-1 successfully appraised which expanded the reserve scale of the structure.

Thirdly, integration of exploration and development was realised using existing facilities and additional reserves were obtained at Jinzhou 25-1, Caofeidian 6-4, Weixinan oilfields, Wenchang 13-6, Panyu 4-1 and Xijiang 30-1.

Such achievements have further consolidated the position of offshore China as the core area of the company and demonstrated the company’s unique strength in offshore China.

Overseas, the company drilled 14 exploration wells, acquired approximately 9,613 kilometers of 2D seismic data and approximately 23,980 square kilometers of 3D seismic data. For overseas exploration, the company made two new discoveries and successfully appraised six oil and gas structures. Main achievements include the followings:

Firstly, five appraisal wells were successfully drilled with the Libra project in Brazil which further confirmed the reserve scale.

Secondly, Liza oilfield in Guyana was successfully appraised, which expanded to new layers and escalated reserve size; success was again made in the wildcat of the Payara structure.

Thirdly, successful in the exploration of the Owowo West structure in Nigeria which proved to be a large scale oil and gas reservoir and increased the economic value of the block.

In 2016, the company adhered to its philosophies of “exploration management” overseas and continued to optimize exploration portfolio. While acquiring new exploration opportunities, the company also successfully farmed out the interests in some overseas blocks, resulting in better returns for the company.

During the year, the company made continual improvement in optimizing exploration, reducing operating costs and enhancing efficiency through management; and strengthened geological research, raised operation standards and refined operation process management, which further improved operation efficiency and lowered exploration cost.

Engineering Construction, Development and Production

In 2016, the company successfully completed its operation targets and the target of oil and gas production set early this year. The company carefully organized its operational resources and made smooth progress in engineering construction.

In 2016, while ensuring safety in the development, production and operation, the company took efficiency enhancement and cost reduction as the core mission and accomplished its development and production target for the year. The company’s net oil and gas production reached 476.9 million BOE, which completed the production target of 470-485 million BOE set in the beginning of the year. The 4 new projects planned for 2016, including Kenli 10-4 oilfield, Panyu 11-5 oilfield, Weizhou 6-9/6-10 comprehensive adjustment and Enping 18-1 oilfield, all came on stream during the year.

In 2016, the company’s development and production were driven by innovation and led by effectiveness, with emphasis on quality, performance and sustaining development. The achievements include the followings:

Firstly, we continued to maintain high production efficiency through refined management.

Secondly, we continuously conducted special programs to lower operating expenses and achieved significant result with operating expenses at US$7.62per BOE, which decreased for three consecutive years.

Thirdly, we made in-depth optimization in the technological plan of development projects, achieving remarkable result in cost reduction and efficiency enhancement.

Fourthly, we lowered the failure rate of equipment and facilities by comprehensively implementing integrity management.

Looking forward to 2017, the workload of onshore construction and offshore installation will increase. A total of five new projects are expected to commence production, including Penglai 19-9 comprehensive adjustment, Enping 23-1 oilfields and Weizhou 12-2 oilfield Phase II in offshore China and BD gas field and Hangingstone project overseas.

Among them, Penglai 19-9 comprehensive adjustment and Enping 23-1 oilfields have commenced production in January 2017. In addition, it is expected that over 20 new projects will be under construction in 2017, supporting the company’s sustainable growth in the future.

In 2017, the company’s development and production are expected to face a harsh external environment due to continued pressure from international oil prices. We will optimize development plans, strengthen integration, effectively connect engineering construction with development and production, while steadily pushing ahead development of key overseas areas. We will select and appraise infill drilling, closely monitor the trend of oil prices and maintain the flexibility on infill drilling.

Unconventional Gas

Acceleration of the development and utilization of unconventional gas is of great strategic significance for energy structure optimization and energy supply guarantee.

The company tracked and researched the new development trend of unconventional gas in the whole world, meanwhile, based on the development idea of “develop CBM, tackle tight gas, explore shale gas”, the company insisted on the principle of “integration of exploration and development, integration of production and sales, integration of self-operation and external cooperation, integration of tight gas and CBM” to promote the exploration and development of unconventional gas.

Relying on the technology advancement, the company continued to intensify exploration and development, accelerated the development of unconventional gas industry and strived to create a new growth potential. Following the guideline of “focusing on the key blocks to explore and invest”, the domestic unconventional exploration was focused on tight gas, and the new bed series exploration has made breakthroughs in new zones. The tight gas reserves and production was increased, CBM production was stabilized and accelerated, the unconventional gas output continued to grow. Part of the well exploration and production integration in Linxing tight gas pilot test zone was advanced where exploration, fracture and operation were realized in the same year, and the daily output of wells in operation reached over 200,000 cubic meters, forming a rapid operation model where a combination of pipe gas sale, LNG sale and medium pressure tank wagon is seen, which accumulated benefiting experience for the economic and high-efficiency exploration and development of tight gas. Notable results were also achieved in CBM exploration and development. North blocks in Shizhuang applied hydrodynamic wave and fracturing technology to shorten the gas breakthrough time, which built foundation for the construction of integration experimental base for the next step. Panhe Demonstration Project increased over 50,000 cubic meters of daily output through the initiation of booster station compressor helical-lobe compressor equipped with border group valve and other measures. South region in Shizhuang South Project achieved the first CBM exploration permit and two gas gathering stations were built and on trial, which enabled the export sales for the CBM in this region, and projects in Liulin and Zaoyuan have been promoted smoothly as planned. In 2016, the company realized CBM utilization equivalent to 940 million m3, increasing by 7.8% compared to that of last year.

In 2016, there were changes in the demand and supply of global natural gas, and the price of natural gas was sharply decreased, which brought extreme challenge to the profitability of unconventional gas. The company confronted the challenge and carried out comprehensive coping strategy. Sales strategy has being constantly optimized, the connection between production and marketing was strengthened, and the online transaction was expanded. Insisting on benefit making by scientific research, one scientific research project and one demonstrative project independently undertaken by the company were approved by the government. The idea of “win-win” in foreign cooperation has won great support, which efficiently promoted the progress of cooperation projects and achieved the income and benefit growth.



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