CNOOC Ltd, China's largest offshore oil and gas producer by capacity, yesterday posted a modest 1.3 percent gain in 2007 profit, its smallest growth in five years, as costs grew faster than production.

Net profit in 2007 rose to 31.26 billion yuan from 30.93 billion yuan the previous year. Revenues rose 2 percent to 90.7 billion yuan from 88.95 billion yuan, with earnings per share dipping to 0.72 yuan from 0.73 yuan a year earlier.

The company, whose shares are traded in Hong Kong and New York, said its windfall tax on oil sales above $40 a barrel rose to 6.84 billion yuan from 3.98 billion yuan the year before because of higher oil prices last year.

Crude stayed at high levels last year, nearly reaching $100 per barrel at the end of 2007.

"CNOOC's expenses are growing faster than revenue and it could get worse if the company doesn't take any action to improve its production growth and lower costs," said Anna Yu, an energy analyst from Taifook Securities.

"One of the biggest challenges for CNOOC is that some of its oilfields are aging and the new ones are yet to catch up. The older an oilfield becomes, the higher the costs climb," said Kenny Tang, an associate director at Tung Tai Securities.

The company is targeting production of 195 to 199 million barrels of oil equivalent in 2008, said CNOOC Chairman and CEO Fu Chengyu at a press conference in Hong Kong yesterday.

CNOOC expects its offshore output to rise to 171 million to 173 million barrels of oil equivalent this year, up from 149 million barrels in 2007, thanks to a full-year contribution from the Liuhua field and other new start-ups.

Fu said the company's total output of oil and gas last year rose only 2.6 percent to 171 million barrels of oil equivalent because of the shutdown of the Liuhua oilfield after a typhoon, while some bigger fields are not due to begin production until later this year.

(China Daily March 28, 2008)