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Oil pipeline leak may take months to fix

By Richard Fu  (Shanghai Daily)

08:39, December 21, 2011

CNOOC Ltd, China's dominant offshore energy producer, has reported another leak in a subsea gas pipeline that forced it to close production at two fields in the South China Sea.

The leakage was found in the pipeline near CNOOC's Zhuhai Hengqin gas processing terminal, the Hong Kong-listed company said in a statement late on Monday. It added that it has shut down the production of relevant platforms of Panyu 30-1 and Huizhou 21-1 fields supplying gas to the pipe and is in the process of depressurizing the pipe.

CNOOC said this will cause a loss of about 26,700 barrels of oil equivalent per day, or 22 percent of the oil giant's total domestic gas production and 3 percent of its total energy output per day.

"While it's still unclear how long it will take CNOOC to fix the problem, we expect it to take normally around 3-4 months to fix a subsea pipeline problem," analysts at Sanford C. Bernstein wrote in a note yesterday.

CNOOC's earnings per share in 2012 may be negatively impacted by less than 0.2 percent due` to the incident, they said. Impact on production will be greater than that on earnings because realized gas prices are lower than crude oil rates.

Simon Powell, head of Asian oil and gas research at CLSA, said as the gas was being sold in Guangdong Province, some shortages could occur if liquefied natural gas supply is unable to make up the balance.

No injury or environmental pollution has been reported and the situation is under control, CNOOC said. The cause of the incident is still under investigation.

CNOOC had cut its 2011 output target to 331-341 million barrels of oil equivalent from 355-365 million barrels after China in September ordered all production to be suspended at its 51-percent owned Penglai 19-3 oilfield in the Bohai Bay following two oil leaks that began in June.

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