China National Offshore Oil Corp. Likely to Miss 2011 Targets

A Sanford C. Bernstein and Co. report has stated that China National Offshore Oil Corp., China’s top offshore oil producer, is likely to miss 2011 output targets.

The report notes that last month Beijing ordered all production suspended at the Penglai 19-3 project, China's largest offshore oilfield, off eastern China’s coast in the Yellow Sea’s Bohai Bay. China National Offshore Oil Corp. currently holds 51 percent of the Penglai 19-3 development.

Beijing’s decision came after it ruled that ConocoPhillips, the U.S. oil giant which operates the field, failed to contain leakage that began in June, The Shanghai Daily reported.

Sanford C. Bernstein and Co. analysts Neil Beveridge and Ying Lou wrote, "Production targets for this year are likely to be missed and next year will continue to be challenging. The Penglai field will remain shut until the year end and will take longer than expected to ramp up in 2012. The oil leak at Penglai appears to have been caused by production related to reservoir deformation induced by water injection. This is relatively rare within the industry and partly related to the complexity of the field."

The government-ordered Penglai 19-3 closure has forced China National Offshore Oil Corp. to cut its annual output estimates from 355 million-365 million barrels of oil to 331 million-341 million barrels.

By. Joao Peixe, Deputy Editor OilPrice.com