Production on 10 January 2017 from the Beibu Gulf fields, offshore China, reached a total of 13.9 MMbbl, according to Horizon Oil.
Up until this point, the Block 22/12 participants have been paying a fixed operating tariff of US$4.75/bbl to China National Offshore Oil Corp. (CNOOC), the fields' operator, for transportation of oil through CNOOC’s Weizhou pipeline, storage and loading facilities. This amount is part of the total cash operating cost which has averaged approximately $12/bbl over the current financial year.
Having reached the 13.9 MMbbl cumulative production milestone, the fixed tariff for all future production will reduce to $0.50/bbl and the total per barrel operating cost will reduce accordingly.
Not only does Horizon Oil receive the benefit of reduced operating cost for its 26.95% working interest share of oil production, the additional effect is an increase in funds in the cost recovery pool under the petroleum contract, to which Horizon Oil currently has a 55% entitlement. The net result is an expected increase in cash flows to Horizon Oil of approximately $0.5 million per month.
The Beibu Gulf fields came onstream in March 2013 continue to produce in line with or above forecast levels, at a current rate of 8500 b/d gross.