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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 new medium and large-scale oil & gas fields”, CNOOC makes extensive breakthroughs in 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 for petroleum and natural gas.

Oil and Gas Exploration

In 2017, CNOOC continued to improve the integration of exploration and development, enhance the monetization capability of reserves and shorten the cycle of liquidation; allocated investment in China seas by concentrating on mature exploration areas but also paid attention to exploration in new areas; overseas exploration realized rolling development on the basis of the existing core projects; and kept the rational share of exploration investment in the Company’s total capital expenditure and ensured the Company’s medium- and long-term development with relatively high workload. In 2017, the reserve replacement ratio of the Company soared up to 305% with the reserve and production ratio returning to more than ten years.

In China seas, the exploration workload of the Company continued to be fully achieved. 116 exploratory wells were explored, 2 of which were under cooperation. 4,417 kilometers of 2D seismic materials and 11,063 square kilometers of 3D seismic materials were collected under both self-operation and cooperation. The Company obtained 17 new discoveries in China seas and successfully rated 14 hydrocarbon-bearing structures. The success ratio of self-operation well exploration in China seas reached 48%-61%.

In 2017, the Company continued to conduct value maximization exploration strategies in China seas and led to abundant achievements, but also enhanced the natural gas exploration and achieved breakthroughs in many fields.

The main results include:

● Efficiently completed the rating of 4 large- and medium scale oilfields including Bozhong 36-1, Kenli 6-4/5/6,Longkou7-6 and WS 16-1 west/WS 23-5.

● The deep-layer natural gas exploring in Bohai Sea achieved major breakthrough. The newly discovered Bozhong 19-6 was estimated to be the largest natural gas discovery ever recorded in the Bohai Bay basin.

● The exploration in high temperature and ultra-high pressure gas fields in the South China Sea achieved breakthrough, which confirmed the exploration potential of Ledong 10 in Yinggehai basin.

● The newly discovered Lufeng 14-8 and Lufeng 8-1 south in the Pearl River Mouth Basin greatly increased the reserve in Lufeng area.

The Company drilled 12 exploratory wells, collected 3,163 square kilometers of 3D seismic materials, obtained 2 new discoveries and successfully rated 2 hydrocarbon-bearing structures overseas. The main results include:

● The Company continuously got new discoveries the Stabroek block in Guyana where has become one of CNOOC’s most successful overseas exploration projects.

● Rated Libra structure in Brazil and the reserve reached expectations.

● Nigeria Preowei-3 well was successfully rated following the significant discovery of Owowo and the reserve has significantly scaled up.

In 2017, the Company focused on overseas strategic layout and won many new high-quality projects in Senegal and Brazil, etc.

Development and Production

In 2017, the Company completed the production goal and the oil and gas output surpassed the target set at the beginning of the year. The Company organized operation resources and well advanced engineering construction. Under the premise of safe production, the Company completed all development and production targets of the year.

In 2017, the Company completed all development and production targets of the year through maintaining high production time efficiency and finely adjusting industrial structure, optimizing water injection and reducing decline rate of oilfields. The net oil and gas output reached 470.2 million barrels of oil equivalent (boe) and surpassed the production target of 450-460 million boe set at the beginning of the year. The 5 new projects, including Penglai 19-9 Oilfield comprehensive adjustment, Enping 23-1 Oilfield cluster, Weizhou 12-2 Oilfield Phase II, BD gas field and Hangingstone were put into operation in succession on schedule.

The Company produced 75.51 million tons of crude oil and 25.9 billion m3 of natural gas, of which 42.78 million tons of crude oil and 14.3 billion m3 of natural gas were domestic production, 32.73 million tons of crude oil and 11.6 billion m3 of natural gas were produced overseas.

In 2017, the Company led development and production by lean management and technology-driven concept, economical and efficient operation and highlighting sustainable development. The main results include:

● Ensured the basic production and consolidated the foundation of the oil industry through lean management.

● Continuously reduced all-in cost per boe by strict cost control in on stream projects for efficient operation.

● Actively deployed adjustment wells to increase production.

● Promoted the thermal recovery of heavy oil in Bohai Sea by enhanced technology-driven concept and striving for break through technical bottlenecks.

Unconventional Gas

Acceleration of the development and utilization of unconventional gas is of great strategic significance for energy structure optimization and energy supply guarantee. China United Coalbed Methane Corporation Ltd. (“CUCBM”) tracked the new development trend of unconventional gas in the world and promoted the exploration and development of unconventional gas, following the guidelines “Developing CBM, Emphasizing Tight Gas, Exploring Shale Gas” and the principle of “Integration of Exploration and Development, Integration of Production and Sales, Integration of Self-operation and Cooperation, Integration of Tight Gas and CBM Exploration and Development”.

Relying upon the progress of science and technology, CUCBM continued to intensify exploration and development, accelerate the development of unconventional gas industry and strive to create new growth opportunities, and achieved a total output of 1.19 billion m3 of CBM in 2017, with an increase of 22.7% compared with last year. CUCBM actively promoted the integration of tight gas and CBM exploration and development and managed to innovate the mode of integration. In practice, after sweet points are found, a development plan is prepared when the exploratory well collects the data of reserves; once the data of proven reserves is ready, a part of the reserves will be developed according to the plan. The new mode could achieve efficient and profitable development by shortening the time of monetization of reserves and taking integration advantages.

CUCBM selected the LX-8 – LX-9 well area in Linxing gas field for the tight gas integration test project and the Northern Shizhuang block for the CBM integration test project. The tight gas project was put into production in November 2017 and achieved drilling, test, pipeline construction, production and sale in the same year. The CBM project achieved drilling, fracture and drainage and production in the same year. The success of test projects set a new mode for the efficient development of unconventional gas such as tight gas and CBM.

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