China National Offshore Oil Corp (CNOOC) plans to invest 20 billion yuan in Zhuhai in Guangdong province to build an offshore engineering base and a gas terminal, a move that will further expand its presence in southern China.

The country's largest offshore oil producer signed a framework agreement with the local government in Zhuhai for the investment last weekend, said a source with CNOOC yesterday. The 20-billion-yuan investment will mainly go towards construction of the engineering base, he said.

But both parties have not yet decided when to complete the 20-billion-yuan investment, he said, declining to be named.

The gas terminal in Zhuhai will either receive natural gas produced by CNOOC's oilfields in the South China Sea, or gas imported from foreign countries, said the source.

Compared to the four LNG (liquefied natural gas) bases in operation or under construction by CNOOC currently, the capacity of the Zhuhai terminal would be relatively small, he said.

CNOOC had its first LNG terminal in Shenzhen, in Guangdong province. It started operation in May 2006.

Analysts said CNOOC's investment plan in Zhuhai is in line with the company's plan to emerge as a stronger player in southern China.

The Beijing-based CNOOC earlier started its Huizhou refinery in Guangdong province. The project, which can process 12 million tons of crude oil annually, was CNOOC's first refinery in China.

Fu Chengyu, president of CNOOC, had said earlier that the company would invest more than 300 billion yuan in the southern Guangdong province in the next five years.

The investment will mainly go towards development of oil and gas fields in the South China Sea, construction of petrochemical projects in Huizhou, and the building of a natural gas pipeline in the region, said Fu.

Guangdong is a key base for CNOOC's future development, said Fu. The company has invested over 120 billion yuan in the province, and in 2008 alone, it invested 33 billion yuan in the region.

CNOOC has set a goal of growing 7 percent to 11 percent between 2005 and 2010 in terms of output, with a goal of producing 225 to 231 million barrels of oil equivalent for 2009, said Fu.

The company is now taking a patient approach to overseas deals rather than rushing for overseas oil and gas assets, he had said.

Winson Fong, a fund manager at SG Asset Management with assets of $2 billion, had told Reuters last month that China's energy stocks were safe bets for investors and they prefer CNOOC for its strong production targets.

"The market is positive on CNOOC's operational structure," Brynjar Bustnes, a JP Morgan analyst, was cited by Reuters as saying. "It's one of the best upstream companies fundamentally, in terms of growth production and cost control."

(China Daily May 13, 2009)