China’s Cnooc set out plans to cut capital spending and reduce oil production
China’s Cnooc on Tuesday set out plans to cutcapital spending by more than 10 per cent this yearand reduce oil production, as it responds to the crude price rout.
The annual forecast by Cnooc’s listed unit serves as the first indication of output andinvestment plans by China’s state-controlled oil producers, which also include China NationalPetroleum Corp and Sinopec.
The listed arm does not represent all of the output by Cnooc’s state-controlled parentcompany, but remains a good proxy for the position of the Chinese industry.
Brent crude was trading at $29 per barrel on Tuesday, having fallen to a 12-year low onMonday, and Li Fanrong, Cnooc’s chief executive, said that oil prices of below $30 madeoperations “very difficult”.
Cnooc said it plans to cut capital spending to “no more than” Rmb60bn ($9.1bn) this year, fromRmb67.5bn in 2015.
It intends to produce between 470m and 485m barrels of oil equivalent this year, comparedwith an estimated 495m last year.
“The pressure to maintain production levels is more likely to come from the companiesthemselves rather than from the government,” he added. “Cutting production would meanworse performance.”
Analysts said the falling crude price had one silver lining for certain oil producers, in the form ofan improved outlook for their refining arms.
This month, China’s National Development and Reform Commission adjusted the formula ituses to set domestic diesel and petrol prices, in order to incentivise refiners.