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THE WALL STREET JOURNAL: Cnooc Profit Jumped 57% in '05

China Energy Titan
Looks to Africa, Asia
To Help Boost Output
By ARIES POON
March 27, 2006
HONG KONG — Cnooc Ltd., China's largest offshore oil producer by output, posted a 57% rise in 2005 net profit on soaring oil prices and increased production and said it will continue pursuing expansion overseas to help boost output further.
Cnooc said net profit was 25.32 billion yuan (US$3.15 billion), up from 16.14 billion yuan in 2004. Analysts surveyed by Thomson Financial had expected the company to earn 27.08 billion yuan. Revenue rose 26% to 69.46 billion yuan.
Cnooc also said it has ended talks on buying natural gas from Australia's Gorgon project, which is led by Chevron Corp. “The Gorgon thing is over,” said Cnooc's company secretary, Cao Yun Shi.
Cnooc's unlisted parent, China National Offshore Oil Corp., has represented the group in the Gorgon talks. Mr. Cao, who is also the chief legal counsel of the parent, declined to elaborate.
Donald Campbell, manager of media relations of California-based Chevron, declined to confirm whether the Gorgon gas talks had ended.
“There are no plans specifically with Cnooc on the sale now,” he said. “We are still interested in working on other opportunities with Cnooc and other companies, wherever possible; we still have some gas that could be sold from Gorgon.”
China faces an increasing shortage of natural gas in the next five years amid sharply rising demand and limited production capacity.
Chevron holds a 50% stake in the Gorgon liquefied-natural-gas venture, while Royal Dutch Shell PLC and Exxon Mobil Corp. own 25% each.
In November, Chevron said it had scrapped a tentative agreement of A$30 billion (US$21.29 billion) for Cnooc to become a foundation customer for the Gorgon gas, saying the price Cnooc was willing to pay was too low. However, Cnooc said late last year that it was still in talks to acquire gas from the Gorgon project.
Chevron late last year signed gas-supply contracts with three Japanese companies — Tokyo Gas Co. Ltd., Chubu Electric Power Co. and Osaka Gas Co. — which are seen as more willing to pay a higher price in sourcing gas abroad.
Cnooc, which bought a stake in a Nigerian oil field in mid-January, said it will focus its expansion in Africa and Southeast Asia.
Hunting for oil and gas resources overseas is a major concern for Chinese oil companies. China has been a net crude importer since 1993, and its domestic oil output is falling farther behind local demand.
Early this year, Cnooc said it was buying a 45% stake in the OML 130 offshore-oil-mining license, which mainly covers Nigeria's undeveloped Akpo field, from South Atlantic Petroleum Ltd., a company owned by a former Nigerian minister. The deal, which cost US$2.27 billion, followed the battle Cnooc lost last year to take over U.S. oil and gas producer Unocal Corp.
Mr. Cao also said Cnooc hasn't agreed on final pricing of natural-gas from the Tangguh project in Indonesia. Indonesia has been pushing since January to raise prices in the long-term Tangguh contract to supply liquefied natural gas to China's Fujian province.
BP Migas, Indonesia's upstream oil and gas regulatory agency, said Thursday that China has agreed to adjust prices from the Tangguh project, operated by a consortium led by BP PLC, which holds around 50%.
Write to Aries Poon at [email protected]

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