China National Petroleum Corp (CNPC), the largest oil producer in the country, has formed an offshore oil engineering subsidiary, signifying a fresh move to exploit oil in its waters.

Traditionally, offshore oil production was dominated by China's National Offshore Oil Corp (CNOOC), China's third largest oil producer. Although CNPC and China's largest oil refiner Sinopec have repeatedly voiced their aspiration of "going offshore", the set-up of the new firm was the country's first-ever actual move in this regard.

The new subsidiary, named the China National Petroleum Offshore Engineering Co Ltd (CNPOEC), was established Wednesday by streamlining the drilling, construction, engineering assets and design institutions of its two subsidiaries - Liaohe Oil Exploration Bureau and Dagang Petroleum Group.

The engineering firm will mainly do offshore well-drilling, engineering, design and maintenance of offshore oil production platform.

At present, CNPC turns out about 1 million tons of oil in shallow waters in Bohai Bay, less than one percent of its total production. With more substantial effort throwing into offshore exploration, CNPC plans to pump out 4 million tons of crude in Chinese waters by the year 2010.

"The setup of CNPOEC is a strategic step for CNPC to speed up offshore oil exploration," said Liu Haisheng, chairman of CNPOEC, at the launching ceremony.

The company has already made "surprisingly encouraging" discoveries in Liaohe, Dagang and Jidong oilfields in the Bohai Bay area recently.

Shi Lin, general manager of CNPOEC, said the launch of his company is also significant for CNPC anchor in its drive for overseas expansion.

CNPC is negotiating to tap offshore oil in foreign countries. And the potential reserves could be "much larger" than the CNPC's domestic offshore oil production, added Shi.

CNOOC appears calm to CNPOEC's potential threat to its dominance in offshore oil production, saying that "competition could promote sound development of the oil industry". The company also expressed its resolve to speed up development of onshore oil exploration and oil products.

Shi acknowledged that there was enough market for both companies. "It is not a problem of competition, but a problem of too large a market," he said. "We cannot finish our current work for at least the next three or five years."

China's offshore oil has been less exploited compared to onshore exploration. More than 80 percent of offshore oil reserves,predicted to be 27.53 billion tons, has not been identified yet. The offshore oil production reached 27 million tons last year, representing about 15 percent of total production.

Source: Xinhua