CNOOC to spend between $200-300 million on Tangguh project

CNOOC will spend US$200-300 million in the five years before 2007 investing in Tangguh, which is expected to supply LNG to CNOOC in the middle of 2007.

Last week, the company said it will pay about $275 million for the 12.5 percent stake it will acquire in the Tangguh LNG project. Tangguh is to supply up to 2.6 million tons of liquefied natural gas per year to the receiving terminal in Fujian province.

CFO Mark Qiu said the company has acquired 850 million barrels of equivalent proven reserves this year through three acquisitions, including the 12.5 percent stake in the Tangguh project.

"These acquisitions are low-risk, high-quality assets, and are in low E&P (exploration and production) areas outside of China," Qiu said at a media conference call.

He said the latest acquisition was offered at an attractive price, with the exploration and production cost coming in lower than $1.5 per barrel, compared with the $4 for the company's offshore bases.

The acquisition will also build a strong platform for its pan-Asian presence, he said.

Qiu stressed that the company's focus is developing and exploring offshore of China's east coast, and not intentionally looking for acquisitions, but that it would take up special opportunities when they arise.

In response to queries as to whether the company is looking to build other LNG terminals, Qiu said: "We do not expand this business based on projects, rather we look at the market's needs.

"Obviously, after the Fujian and Guangdong terminals, we would have ample experience and competitiveness in exploring, negotiating, constructing and buying LNG projects. When there is such a need in the market, we will look at the next opportunity, but no such plans exist at this juncture."

He said the political risk in Indonesia is "manageable" and the company has already fully considered the political risk factor before undertaking the acquisition.

"Indonesia is the only OPEC member in Asia. It has a long history in oil production and it's a major oil supplier. Many large oil companies have invested in Indonesia," he said.

He said the company is not being over-aggressive over the investment in LNG supply because there has been reasonable demand in China.

"We have been conservative in our LNG investment... it has development potential and we are confident that it can be absorbed by the Fujian market," he said. (*)