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China’s Energy Security Push Shows First Crack from Oil Crash


(Bloomberg) — Cnooc Ltd., one of China’s three state-owned oil giants, said it will cut capital expenditure target this year, a signal that the government’s push to boost domestic production can’t withstand the collapse in crude prices.

The country’s largest offshore driller didn’t give a new spending range for 2020 as the plan is under review. It will provide an update to investors at a later date, the company’s management said on an earnings call Wednesday.

The planned cuts contrast with comments from Cnooc just last week saying it didn’t plan to revise spending and production targets despite oil’s 60% collapse this year. Chinese oil majors have been under pressure from the government to boost domestic output amid the country’s rising dependence on oil and gas imports in recent years.

“Let me say for sure that the 2020 capital expenditure will be cut from our initial projection,” Chief Executive Officer Xu Keqiang said on the call.

Cnooc in January forecast capital expenditure of 85 billion to 95 billion yuan ($12 billion to $13.4 billion) this year, which would be the highest since 2014. It spent 79.6 billion yuan in 2019, an increase of 27% from the year before.

The management sees room to lower costs further and will focus efforts on overseas projects, which have higher costs than domestic operations. Cnooc has managed to cut all-in costs for six straight years to $29.78 a barrel of oil equivalent in 2019.

The company said it plans to reduce some less-efficient overseas output while bolstering domestic production.

State-owned peer PetroChina Co., the nation’s biggest oil and gas producer, will publish earnings Thursday and is expected to provide 2020 spending guidance. Sinopec Corp. is set to report Sunday.

©2020 Bloomberg L.P.

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