CNOOC sets out its plans for Pearl River

China National Offshore Oil Corp, the country's largest offshore oil and gas producer, will join efforts with nine foreign oil giants to conduct exploration in the Pearl River Mouth Basin, Guangdong province.

The State-owned company announced on Tuesday it has signed a strategic agreement with partners including British-Dutch oil and gas firm Royal Dutch Shell Plc, US Chevron Corp, US ConocoPhillips, French Total SA, Norwegian Equinor ASA, Canadian Husky Energy Inc and Australian Roc Oil Co.

According to CNOOC, exploration will take place in Block A and B in the Pearl River Mouth Basin. Block A covers an area of 15,300 square meters and is in water depths of 80 to 120 meters. Block B has an area of 48,700 square meters with water depth ranging from 500 meters to 3,000 meters.

At the signing ceremony, CNOOC Chairman Yang Hua said the strategic alliance expects to utilize many exploration technologies to deal with different offshore conditions.

Yang said the central government highly values oil exploration, and gives specific direction for the development of the sector.

The company plans to invest more in oil and gas exploration in the next few years to raise the company's output and reserves, Yang said, adding "this will be our major direction".

He added the company would further expand its cooperation with other parts of the world, from upstream exploration to the whole value chain.

After nearly 40 years of development, CNOOC has operations in 43 countries and regions, and nearly 50 percent of its total assets were generated from outside China, according to Yang.

Globally, oil exploration largely dried up following the oil price collapse in 2014, as companies focused on conserving their cash, gearing their spending toward lower risk, lower cost and shorter cycle projects, according to a recent Fitch Solutions Macro Research report.

However, there are signs that exploration activity is starting to recover, the report said. It predicted that oil exploration in frontier, deepwater and prospective sites would increase in 2019, thanks to higher oil prices and lower service costs.

"On an annual average basis, revenues will be boosted by higher oil prices, while still compressed service costs will bolster cash flows. This will give companies greater flexibility to increase their capital expenditures and assume more risk," the report said.

The report noted that fears of peak demand and the longer-term health of the industry will likely keep margins more sharply in focus.

Zheng Xin contributed to this story.