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Citic Resources to double oil output

(China Daily/Agencies)
Updated: 2009-08-14 11:45

Citic Resources Holdings Ltd, the Chinese metals producer turned oil supplier, has started drilling an offshore oilfield in northeastern China that could potentially double its petroleum output by 2014, boosting sales.

Peak oil production at Yuedong field in the Bohai Bay may reach about 1.8 million metric tons a year, Chief Executive Officer Sun Xinguo said in Panjin, Liaoning province on Wednesday. That's equivalent to 36,150 barrels a day, compared with the company's total output of 33,500 barrels daily this year.

The unit of China's largest State-owned investment company is counting on a recovery in energy demand to boost earnings from its oil division, after posting a loss last year as crude prices slumped. Moody's Investors Service yesterday put the credit ratings of Citic Resources on review for possible downgrade, after the company said it expects to report a first-half loss.

The possible loss "has more to do with the macro environment and it was a hard time for energy companies with commodity prices falling," Citic Resources Investor Relations Manager Joseph Chow said in Panjin. "There's no problem with our investment and operations, and we expect improvement in the second half on potential stabilization of oil prices."

Citic Resources bought Karazhanbas oilfield in western Kazakhstan in 2007 and has an interest in a block in Indonesia, where the company acquired its first energy asset in 2006. Citic Resources also has a stake in Brisbane-based Macarthur Coal Ltd, the world's largest exporter of pulverized coal used in steelmaking.

Shares of Citic Resources rose 1.7 percent to HK$2.39 yesterday. The stock has more than doubled this year, compared with the 45 percent gain in the benchmark Hang Seng Index.

Related readings:  China's crude oil output hits 93.49m tons in H1  China's refined oil output in May hits record high  China's crude oil output hit 190 mln tons in 2008  Oil output down in Dec as reserves pile up

Citic Resources said on Wednesday it might post a first-half loss compared with a profit a year earlier mainly because of deteriorating demand for energy resources and commodities amid the global recession. Commodities prices slumped 43 percent last year, according to the S&P GSCI Index of commodities.

Citic Resources acquired Yuedong when it purchased a 90-percent stake in oil explorer Tincy Group Energy Ltd in 2007. Yuedong's output will match Citic Resources's combined production from Indonesia and Kazakhstan as the company seeks to expand output, Sun said.

"The company will invest $120 million in the field this year and may increase spending next year," Sun said. Citic Resources is also seeking to buy "upstream and downstream petroleum assets" both at home and overseas, he said, without giving details.

The cost of oil drilling for Citic Resources fell in the first half from $19.3 a barrel last year as prices of crude and other raw materials declined, Sun said, without elaborating, before the company's six-month earnings announcement.

Citic Resources plans to eventually drill 161 wells at depths between 1,800 meters and 2,200 meters at Yuedong. Total development cost may reach 6.5 billion yuan, Tincy President Wu Fengliang said.

As many as four wells at Yuedong may start producing oil in the second quarter of next year, Wu said.