China's crude-oil output has grown by an average of 2.2% annually since 2002, according to Chinese government data, amid maturing domestic fields. At the same time, its oil demand is expected to grow by about 4% in both 2013 and 2014, according to U.S. government energy forecasts.
State-run Cnooc Ltd. said in a statement posted to its website on Tuesday that it would offer 25 offshore blocks to foreign companies this year, 15 of which have a depth of at least 1,480 feet—the threshold for deep water. Last year, Cnooc offered 26 blocks, six of which were in deep water. That was the first time in a decade it had even offered deep-water blocks to foreign partners.
All of the deep-water blocks are located in the South China Sea, though they aren't in areas claimed by other countries. Parts of the South China Sea-which China has yet to exploit but which is believed to hold considerable underwater mineral riches-are claimed by China, the Philippines, Vietnam, Malaysia and other countries.
Foreign companies typically pay for all exploration and development costs in China and can't own more than 49% of the projects.
Each year, Cnooc offers at least a dozen offshore blocks to foreign partners via tender, but few parties have shown interest because of an absence of information about the quality of the assets and the high cost to develop them. One deep-water well, for example, can cost more than $1 billion to drill.
Since 2005, only nine offshore blocks have been selected through Cnooc's annual tender for development in China, according to a Wall Street Journal analysis. Although the exploration results of blocks offered via tender have generally been disappointing, four of those blocks were selected just in the past year by BP PLC of Britain, Chevron Corp.of the U.S. and PetroBroad Copower Ltd. of Hong Kong.
Meanwhile, Cnooc has been trying to develop its own deep-water abilities. Last year, the company began operating its first deep-water drilling rig capable of operating at a depth of 9,800 feet.
