Future oil and gas growth poles at sea? Investment continues to increase The contribution to new reserves is increasing

China's first comprehensive report on marine energy development, "China Ocean Energy Development Report 2021", was recently released
by the Energy Economic Research Institute of CNOOC Group.
Offshore oil and gas production has become an important energy growth pole, with Asia leading the recovery of global offshore exploration activities, with China's waters being one
of the most active areas for exploration, the report argues.
Offshore oil and gas new production projects are mainly distributed in the Asia-Pacific region, Europe and other regions, China's production projects ranked fourth, and CNOOC's offshore oil and gas production projects ranked first
among global oil companies.

The report predicts that in 2021, China's marine crude oil and natural gas production will be 54.
64 million tons and 19.
6 billion cubic meters, respectively, an increase of 5.
8% and 5.
4% year-on-year, of which the increase in marine crude oil will account for more than 80% of the total increase in the country, the best level in history; The development of marine natural gas resources is gradually moving towards
deep water and ultra-deep water.

The report predicts that in 2022, China's offshore oil and gas production will continue to increase, and crude oil production is expected to reach 57.
6 million tons, up about 5.
4% year-on-year, accounting for about 80% of the national crude oil increase; Natural gas production exceeded 20 billion cubic meters, up about 6.
7% year-on-year, accounting for about
12% of the national natural gas increase.

China's offshore oil and gas exploration new discoveries ranked among the top three

Data from the China Ocean Energy Development Report 2021 shows an increase
in offshore oil and gas exploration drilling workloads.
Global investment in offshore oil and gas exploration in 2021 will be approximately US$21.
1 billion, down 0.
8% year-on-year and still at a low level
.
The global offshore drilling workload increased significantly, with a total of 481 initial exploration and evaluation wells, an increase of 17.
8% year-on-year, concentrated in Chinese waters, deep waters in Mexico, the UK-Norway North Sea, and Guyana waters
.

Regionally, more than half of the offshore drilling is concentrated in Asia, and nearly 1/4 is distributed in the Americas
.
In terms of water depth, the number of wells with a water depth of 0 to 300 meters accounts for 70%
of the total.

However, offshore oil and gas exploration findings have declined
significantly.
There were 41 new discoveries in global offshore exploration, with new proven recoverable reserves of about 6.
5 billion barrels of oil equivalent, down 28%
year-on-year.
Among them, the new proved recoverable reserves of oil were 4.
2 billion barrels, accounting for 65%, and the new proved recoverable reserves of natural gas were 2.
3 billion barrels of oil equivalent, accounting for 35%.

In terms of subregions, the Americas, Asia and Africa were found to be about 2.
5 billion barrels, 1.
5 billion barrels and 1.
1 billion barrels
respectively.
By country, Brazil, Guyana and China are among the top three countries
in the new discoveries in offshore oil and gas exploration.

In 2021, the success rate of global offshore oil and gas preliminary exploration wells will be about 34%, down about 5%
year-on-year.
Medium-sized oil and gas fields were found 17, an increase of 1 year-on-year, but no large oil and gas fields
were found.

Investment in offshore oil and gas new production projects has almost doubled
.
In 2021, the global offshore oil and gas new and production project development investment was US$57.
593 billion, an increase of 95.
3% year-on-year, accounting for 61.
8% of the development investment in new oil and gas projects, exceeding the pre-epidemic level; There were 86 new offshore oil and gas projects, an increase of 43.
3% year-on-year, accounting for 52.
8%
of the new oil and gas projects。 From the perspective of water depth, the global offshore oil and gas new construction and production projects are mainly less than 500 meters of
water depth.

From a regional perspective, offshore oil and gas new construction and commissioning projects are mainly distributed in the Asia-Pacific region, Europe, North America and South America; In terms of countries, Norway, the United Kingdom, India, China, the United States, Brazil, Australia, Indonesia, Malaysia and Egypt are the top 10 countries
in terms of the number of new offshore oil and gas projects put into production.

From the company's point of view, the main investors in offshore oil and gas new production projects are Asian National Petroleum Corporation and International Petroleum Corporation, in order of the number of projects put into production, namely CNOOC, Indian Oil and Gas Company, Mexican National Petroleum Corporation, Shell, BP, Petronas Malaysia, Petronas Indonesia, Chevron, Eni, Total, Qatar National Petroleum Corporation, Norwegian Statoil, and Thai National Petroleum Corporation
.

Ultra-deepwater investment has grown significantly

According to the "China Ocean Energy Development Report 2021", the production period expenditure of offshore oil and gas new projects in 2021 is 2.
669 billion US dollars, an increase of 40.
1%
over 2020 。 From a geographical point of view, Asia accounted for 30.
3% of the production period expenditure of offshore oil and gas new production projects, 22.
4% in the Middle East, 16.
1% in Europe, 15.
1% in South America, 10.
5% in North America, 4.
6% in Africa, and 0.
9% in Oceania.
Growth was mainly in Asia, Europe, South America, the Middle East and Oceania, while Africa and North America saw varying degrees of decline, with declines of 55.
6% and 34.
2%
respectively.

From the perspective of water depth, project expenditure is still dominated by water depth of less than 500 meters, but the proportion fell by 18.
4 percentage points year-on-year, while the proportion of project expenditure with a water depth of 501 to 1500 meters and greater than 1500 meters increased by 13.
4 percentage points and 5.
1 percentage points
respectively year-on-year.

Offshore oil production continues to decline
.
In 2021, due to the reduction of upfront investment, OPEC+ production restrictions, the spread of the epidemic, extreme weather and production accidents, global offshore oil production was about 25.
6 million barrels per day, down 3.
76%
year-on-year.
However, marine gas production increased slightly
.
In 2021, global marine natural gas production reached 1,139.
9 billion cubic meters, an increase of 15.
7 billion cubic meters over the previous year, a year-on-year growth rate of 1.
4%.

Investment in offshore oil and gas exploration and development remains at a low level
.
In 2021, global investment in offshore oil and gas exploration and development was approximately US$136.
3 billion, down 2.
2% year-on-year and 33%
of total oil and gas investment.
Global offshore oil and gas investment has risen from 2010 to peak in 2014, followed by a downward trend and has not yet come out of the trough
.

Global investment in offshore oil and gas deepwater and ultra-deepwater increased
.
In 2021, it is estimated that the proportion of 0-300 meters, 301-500 meters, 501-1500 meters, 1501-3000 meters, and more than 3000 meters of water depth is 53.
8%, 7.
6%, 17.
9%, 20.
6%, and 0.
2%,
respectively 。 Compared with 2020, investment in water depths of 0-300 meters, 301-500 meters and above 3000 meters decreased by 8.
4%, 9.
3% and 41.
6%, respectively; The increase came from investment in water depths of 501 to 1500 meters and 1501 to 3000 meters, respectively, an increase of 5.
5% and 14.
6%, respectively, and the growth of ultra-deep water investment was particularly significant
.

Finding that a limited amount of resources leads to increased costs

The China Ocean Energy Development Report 2021 argues that the cost of offshore oil and gas exploration has risen globally
.
In 2021, despite the strengthening of cost control upstream, the cost of global offshore oil and gas discovery increased by 38.
2% year-on-year, about $2.
75/barrel of oil equivalent, 36.
1% higher than pre-epidemic 2019, but 79%
lower than the onshore oil and gas discovery cost ($13.
09/barrel oil equivalent) due to limited exploration and discovery resources.

The global offshore oil and gas exploration cost has an inverse relationship with the water depth, stemming from the fact that the newly discovered reserves are mainly concentrated in the ultra-deep water fields such as Brazil and Guyana, and there are few diving discoveries
.

The regional differences in global offshore oil and gas exploration costs are obvious
.
Oceania's cost surge due to the discovery of low reserves is the highest in the world, North America costs have declined, but still in the world's second highest, Europe costs increased significantly, ranking third, Asia and the Middle East costs have decreased, at a global low
.

Development costs for new offshore oil and gas projects have declined
globally.
Affected by factors such as water depth, oil and gas resource storage status, environmental requirements, and labor costs, project development costs in North America, Africa, and Europe are generally high, and project development costs are lowest
in the Middle East.

The global offshore oil and gas bidding authorized exploration block has decreased significantly, the merger and acquisition transactions are still not active, the amount and number of mergers and acquisitions are at a low level, and the M&A transactions are mainly 0-300 meters deep
.
In 2021, only 9.
2 billion barrels of oil equivalent M&A transactions
were completed as of November 12.
There are more oil and gas transactions in the global offshore oil and gas M&A, and the sellers are mostly large international oil companies, and the buyers are mostly small and medium-sized oil companies
.

Offshore continues to lead the global in new oil and gas reserves

The report forecasts the global market in 2022, arguing that global offshore oil and gas exploration and development spending will continue to rise as oil and gas prices rise, and global investment in offshore oil and gas exploration is expected to be $24.
4 billion, an increase of 15.
6%
year-on-year.
The contribution rate of new offshore reserves to the growth of new global oil and gas reserves is increasing, with the contribution rate exceeding 70% for two consecutive years in 2020 and 2021, and it is expected that new offshore reserves will continue to lead the global new oil and gas reserves in 2022
.

The report predicts that in 2022, there will be 74 new offshore oil and gas projects in the world, a year-on-year decrease of 12.
9%, and the development investment will be 74.
852 billion US dollars, an increase of about 30%
year-on-year.

The global offshore oil and gas new production projects are still dominated by water depths of less than 500 meters, but the proportion has decreased by 9 percentage points compared with 2021, while the proportion of water depths of 501 to 1500 meters and greater than 1500 meters has increased
significantly.

The new and commissioned projects of global offshore oil and gas are mainly distributed in Asia, Europe, North America, Africa and South America, and the main investors are international oil companies and Asian national oil companies
.

In order of the number of projects put into production, the top companies are Norwegian Statoil, Shell, Indian Oil and Gas, CNOOC, BP, Total, Petronas Malaysia, Woodside Energy of Australia, Eni, Saudi Aramco, Lukoil, PetroIndonesia and Beach Energy Australia
.

The China Ocean Energy Development Report 2021 expects global offshore oil production to be about 26.
9 million barrels per day in 2022, up 1.
3 million barrels per day, or 6.
5 percent, but still below 2019 production levels
.
With the full recovery of the natural gas market, global marine natural gas production is expected to reach 1,208.
5 billion cubic meters, an increase of 4.
6 percentage points over the previous year to 6%.

It is estimated that the global production period expenditure of offshore oil and gas new and production projects in 2022 will be 3.
761 billion US dollars, an increase of about 40.
9% year-on-year; Global investment in offshore oil and gas exploration and development is expected to grow slightly to US$143.
4 billion, an increase of about 5.
1% year-on-year, accounting for 32%
of the total investment in global oil and gas exploration and development.

The report also indicates that deepwater/ultra-deepwater oil and gas resources exploration and development activities will further recover, and offshore oil and gas exploration, development and production costs may increase, but will continue to remain low
.
The activity of offshore oil and gas bidding will also be significantly improved
.

Crude oil production is mainly in the Bohai Sea and the South China Sea

Regarding China, the report estimates that marine crude oil production in 2021 will be 54.
64 million tons, which has exceeded the record high of 2015, with a year-on-year increase of 5.
8% and more than 80%
of the national crude oil production increase.
Among them, the Bohai Sea and the eastern part of the South China Sea are the main areas
for crude oil production.

In 2021, China's marine natural gas production reached 19.
6 billion cubic meters, an increase of 5.
4% year-on-year, accounting for about 6.
7%
of the national natural gas production increase.
With the commissioning of Lingshui 17-2, China's first offshore large-scale deep-water self-operated gas field, the structure of offshore oil and gas production at different water depths will change and has begun to move towards
deep-water and ultra-deep-water.

The report believes that in 2022, China's offshore oil and gas exploration and development investment will continue to maintain a growth trend
.
The key areas of exploration include Liaozhong, Shiusutuo Bulge, Treasure Island 21 and its perimeter, Yingge Seabed Area, etc
.
Lufeng 15-1 Oilfield, Weizhou 12-8 East Block Oilfield, Dongfang 1-1 Southeast Zone and Ledong 22-1 Gas Field South Block and other major oil and gas field projects will be put into operation
successively.

The China Ocean Energy Development Report 2021 predicts that China's offshore oil production will reach 57.
6 million tons in 2022, up about 5.
4% year-on-year, accounting for about 80% of the national oil increase; Natural gas production exceeded 20 billion cubic meters, up about 6.
7% year-on-year, accounting for about
12% of the national natural gas increase.