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How will China use its new oil rigs?

The Chinese plan to build a series of new multi-billion dollar drilling rigs shows their obvious ambition to seek and exploit waters worth trillions of dollars in international trade and natural resources.

VietNamNet Bridge – The Chinese plan to build a series of new multi-billion dollar drilling rigs shows their obvious ambition to seek and exploit waters worth trillions of dollars in international trade and natural resources.

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The Chinese drilling rig HD 981 illegally deployed on the Vietnamese continental shelf

More drilling rigs to be built

The China National Offshore Oil Corporation (CNOOC) is moving ahead with its plan to build more huge drilling rigs. A report from ADB (the Asian Development Bank) showed that in April alone, China’s third largest oil and gas group three times issued bonds (3-30 year term bonds) to mobilize $4 billion for its projects’ implementation.

CNOOC was known as one of the conglomerates that mobilized the hugest amounts of capital through bond issuance in 2012 and 2013. Prior to that, it spent big money to master the skills of making exploration drilling in deep waters when buying the Canadian Nexen Group for $15 billion and signing technology transfer contracts with Friede & Goldman.

In September 2012, COSL, a subsidiary of CNOOC, the owner of Hai Yang Shi You 981 (HD 981) oil rig, also issued bonds to mobilize $1 billion worth of capital.

It is unclear how the mobilized capital would be used. However, prior to that, in late 2013, COSL signed contracts with the Dalian shipbuilding yard and another yard in Shenzhen on the building of another three oil rigs. The three include HD 982, which is similar with HD 981, and the other smaller HD 943 and HD 944.

Like HD 981, HD 982 is a 6th-generation semi-submersible oil rig, which can withstand powerful storms, equipped with positioning system, designed to be able to operate in the deep waters as deep as 1,524 meters and capable to drill at the depth of 9,144 meters. The oil rig has eight propellers, each of which is run by 4,600 CV engine.

HD 982 may be completed by August 2016.

Meanwhile, HD 943 can be installed in waters with a depth of 122 meters and can drill at a depth of 10,668 meters. The same features will also be equipped for HD 944. The two are expected to be handed over to CNOOC by September and October 2015.

In early May 2014, CNOOC illegally deployed HD 981, valued at $1 billion at the Vietnamese exclusive economic zone.

China’s “deep sea ambition”

In a press release in early last November, President and CEO of COSL Li Yong said the building of the three oil rigs would help improve the corporation’s activities in deep water areas in special conditions.

However, it is obviously not easy to put such huge drilling rigs into operation and it is difficult for COSL to succeed and make profit.

International analysts said that it is very costly to run HD 981. It costs hundreds of thousands of dollars a day just to keep it standing in the sea, including other big expenses to “feed” hundreds of ships to protect the rig around.

They also pointed out that CNOOC is spending money on huge equipment to implement long-term strategies which need costs far beyond the capability of one enterprise.

Van Minh

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