OPEC flood a boon to China oil giant as Iraq boosts output

SHANGHAI, China (Bloomberg) -- OPEC’s decision to flood global markets is helping China’s biggest oil company pump record volumes overseas.

China National Petroleum Corp. more than doubled production from Iraq last year as the group’s second-biggest member followed the group’s strategy of boosting supply. The company’s equity oil and natural gas production overseas rose 10.5% to 72.02 MM t last year (about 1.45 MMbpd), it said on its website Thursday. Equity output refers to the company’s share of production split between project partners.

Iraq’s output averaged about 4 MMbopd last year, up more than 20% annually, according to estimates compiled by Bloomberg. That boost came as prices collapsed 35% under pressure from Organization of Petroleum Exporting Countries’ decision to effectively abandon quotas to protect market share. CNPC produced 23.64 MM t of its crude last year in Iraq, or almost 475,000 bpd, exceeding its annual target by 12%, it said.

“Most of the CNPC overseas output increase was due to Iraqi fields,” Gordon Kwan, a Hong Kong-based analyst at Nomura Holdings Inc., said by e-mail. “This is consistent with OPEC’s strategy to boost output and wrestle back market share from higher cost U.S. shale oil producers.”

CNPC, either directly or through its listed arm PetroChina Co., owns stakes in Iraq’s West Qurna 1, Rumaila and Halfaya oil fields. Equity production from Iraq increased 135% last year, the company said in a Jan. 5 statement.

Operation Challenges

CNPC added 98.86 MM t of overseas recoverable oil and gas reserves last year, 29% above its target, in countries including Kazakhstan, Sudan and offshore Brazil. Total overseas output at projects it operates climbed 8.5% to 138 MM t, a figure that includes oil and gas owned by project partners.

“In 2015, the overseas operation was challenged by low oil prices, geopolitical instability and worsening security in some countries, as well as big currency fluctuations,” CNPC said in the statement. “The company has been coping with the difficult time through cutting costs.”

CNPC last year cut investments in its Kazakhstan operations by 50% and lowered spending in Latin America by more than 60%, it said.