(Repeats without change. Corrects penultimate paragraph to say
Lingshui "could attract global firms" rather than is "too big
for them"; corrects spelling of Aker Solutions in 13th
SINGAPORE/BEIJING, July 9 (Reuters) - When the first gas
from CNOOC Ltd's new ultra-deep field in the South China Sea
started flowing in late June to the world's largest customised
floating platform 1,500 meters above the sea bed, it marked a
key phase in China's gas drive.
For CNOOC, the output from one of Asia's deepest
gas fields proved the company had the engineering chops to
complete its first wholly-owned project on schedule and make
significant strides towards its target of gas making up half its
output portfolio by 2035, from 21% currently.
For China, the tapping of major gas reserves within its own
waters supported its plan to use natural gas as a 'bridge fuel'
that will help the country meet its goal of capping carbon
emissions by 2030 while phasing out dirtier coal.
And for the broader energy sector, the start-up of Lingshui
17-2, with proven reserves of 100 billion cubic meters and wells
sunk 4,000 meters below the seabed, shored up confidence that
China's energy majors possess the technical and operational
acumen to fulfill their gas ambitions even as international
rivals slow fossil fuel development in favour of green energy
"CNOOC doesn't make excuses for the gaseous part of its
portfolio, having firmly pitched its tent with the camp that
sees natural gas as a key transition fuel in the global pivot to
clean energy," said Readul Islam, research analyst at Rystad
"Given China's demand for energy now, gas satisfies that
demand with the lowest emissions baggage."
INNOVATION & EXPLORATION
First discovered in 2014 and located 150 km (93 miles) south
of China's southernmost province Hainan, Lingshui is nearly four
times deeper than CNOOC's independently operated Liuhua
16-2/20-2 oil field, which sits 410 metres below the surface in
the Pearl River basin.
Globally CNOOC owns deepsea oil assets in tie-ups with Total
in Nigeria and ExxonMobil in Guyana, and also
jointly owns with Canada's Husky Energy Liwan 3-1,
China's second-deepest gas project about 1,300 meters subsea in
the South China Sea. But it has never operated its own deepwater
At peak capacity, Lingshui will pump 3 billion cubic meters
a year, or 1% of China's current gas demand, and deliver 20% of
CNOOC's total gas output by 2024.
"Despite development challenges and large investment, its
sizeable reserve and production scale will make Lingshui a
competitive project," said a CNOOC representative.
The launch of Lingshui would also spur development of nearby
deepwater projects to form "a gas cluster of a trillion cubic
meters' reserve" to supply Hong Kong, Guangdong, Guangxi and
Hainan, the official said.
Key to the project's success has been the 23.6 billion yuan
($3.64 billion) Shenhai-1 ("Deep Sea-1"), a 53,000-tonne,
120-meter (395-ft) tall semi-submersible production and storage
platform, the world's first of its scale, dedicated to the
The project incorporates engineering expertise from
Britain's Wood Group and a complex subsea production system from
Norway's Aker Solutions worth $200 million, including underwater
control systems that can withstand extreme pressure and over 70
km (43 miles) of umbilical cables linking the subsea development
"The success of the project is based on CNOOC's open and
collaborative approach in partnering with international
companies ... enabling the joint development of innovative
solutions together," said Ouyang Xin, Aker Solutions' General
Manager and Head of Subsea China.
Zhang Xianhui, analyst at Wood Mackenzie, said one of
Shenhai-1's innovations is to store condensate, a light oil that
coexists in gas reservoirs, inside the platform's columns,
averting the need for separate floating storage for liquids.
"The successful development of a deepwater project of such
scale and complexity will lead to technological breakthroughs
(that are) vital to unlock other difficult-to-extract
resources," said Baihui Yu, analyst at IHS Markit.
ON ITS OWN
Analysts said CNOOC had previously been expected to bring in
an international partner to share costs and risk, but having
gone through the entire cycle from discovery through execution
on its own, it may have quietly dropped the idea.
"Given the current U.S.-China tensions, convincing a board
to take up a position in China, and at a potentially elevated
valuation, may be a tall ask," said Rystad Energy's Islam.
However, if CNOOC chose to divest, Lingshui's size - with
peak daily output estimated at 330 million cubic feet - could
attract global firms looking to reposition themselves for energy
transition, he added.
CNOOC did not comment on whether it is considering a global
partner for Lingshui.
($1 = 6.4804 Chinese yuan renminbi)
(Reporting by Chen Aizhu in Singapore and Muyu Xu in Beijing;
Editing by Shivani Singh, Gavin Maguire and Richard Pullin)