High Prices Drive Chinese NOC Transitions

Surging upstream profits are giving Chinese national oil companies (NOCs) an opportunity to boost transition spending and flesh out decarbonization goals. But China’s energy security remains their primary mission and in the near term this means continued growth in domestic fossil fuel production. China’s plans to peak carbon emissions by 2025 and become carbon neutral by 2060 pushed its NOCs to come up with transition goals. But a flurry of initial pledges lacked detailed plans. With crude prices averaging $108 per barrel this year, their highest since 2013, China’s NOCs have the cash they need to progress their green plans. “With high oil prices, companies can do it all — fund their E&P, pay dividends, service debt and still have spare financial capacity to develop energy transition projects,” Wood Mackenzie’s corporate research director Kavita Jadhav told Energy Intelligence. Upstream-focused China National Offshore Oil Corp. (CNOOC) Ltd. expects first-half 2022 profits to more than double from last year to as much as 71.5 billion yuan ($10.6 billion). Parent company CNOOC has pledge to boost clean energy investments to 10%-15% of total capital expenditure from the 2026-30 period, up from the current 5%-10%. The plan would make the company a leader among NOCs in terms of green energy spending and exceed the transition spending guidance of Exxon Mobil and Chevron as a percentage of capex.