China National Offshore Oil Corp, the country's largest offshore oil producer, has offered 26 more offshore blocks for joint development with foreign exploration companies on Tuesday, which experts said represented a massive expansion in its exploration activity.

It is the second round of joint development tenders by the State-owned oil and gas giant this year for offshore oil resources, after inviting foreign companies to bid for nine blocks in the western area of the South China Sea in June.

The latest auction includes 22 blocks in the South China Sea, three in the East China Sea and one in northern China's Bohai Bay, covering a total area of 73,754 square kilometers.

Bai Bing, a senior analyst at Beijing Petroleum Exchange, said it was probably the company's largest tender since China started offshore exploration in the 1990s, demonstrating CNOOC's determination to increase its output.

As the company also continues to expand its refining capacity, Bai said CNOOC is signaling an overall acceleration of its program to link all parts of its business.

"Strengthening its upstream, exploration and production will help ensure the supply in its downstream, sales and distribution businesses," he said.

Liao Na, information director at the energy consultancy ICIS C1 Energy, added that although oil demand growth has slowed slightly this year, "it will keep growing in the long term, which will make the upstream business profitable".

"Besides, the inland oil exploitation scale is getting smaller, which cannot meet the growing demand of China's oil consumption."

CNOOC first started drilling in the South China Sea in May, and was optimistic about its prospects of finding oil. Until then, most of its domestic oil and gas exploration had been limited to a depth of around 300 meters - the level at which exploration is considered either deep, or shallow water drilling.

"Cooperation between CNOOC and foreign companies will help develop better deepwater oil and gas exploration technology, which will become more necessary to secure China's future energy supplies," Bai said.

He predicted that British oil companies may have the most interest in the latest cooperative tenders because they have more experience of the kind of deepwater drilling required, from operations in the North Sea.

Last month, CNOOC announced it had agreed to pay $15.1 billion to acquire Nexen Inc, the Calgary-based oil and gas producer, which was read by analysts as a significant move to gain more access to North Sea oil supplies, and to participate in the international oil pricing market.

Nexen controls the United Kingdom's largest oilfield Buzzard. The benchmark Brent oil contract is based on four North Sea crude oils - Brent, Forties, Oseberg and Ekofisk - and Buzzard is the largest field of the more than 70 that feed into Forties.

Meanwhile, on the same day, Beijing-based China Petrochemical Corp said it was paying $1.5 billion for a 49 per cent stake in Canadian oil firm Talisman's UK North Sea business.

CNOOC's Nexen acquisition will help the company increase its annual output by more than 20 percent. Without the purchase, its output was predicted to increase only by 3 to 6 percent this year.

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(China Daily 08/29/2012 page13)