SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 6-K
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REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
For December 9, 2005
CNOOC Limited
(Translation of registrant's name into English)
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65th Floor
Bank of China Tower
One Garden Road
Central, Hong Kong
(Address of principal executive offices)
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(Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F)
Form 20-F X Form 40-F
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(Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of
1934.)
Yes No X
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(If "Yes" is marked, indicate below the file number assigned to the registrant
in connection with Rule 12g3-2(b): N/A.)
Company Announcement
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The Stock Exchange of Hong Kong Limited takes no responsibility for the
contents of this announcement, makes no representation as to its accuracy or
completeness and expressly disclaims any liability whatsoever for any loss
howsoever arising from or in reliance upon the whole or any part of the
contents of this announcement.
[LOGO OMITTED]
CNOOC Limited
[Company Name in Chinese Characters]
(Incorporated in Hong Kong with limited liability under the Companies Ordinance)
(Stock Code: 883)
AMENDMENT TO EXISTING NON-COMPETE UNDERTAKING,
REVISED CAP FOR EXISTING CONTINUING CONNECTED TRANSACTION
AND
NEW CATEGORISATION FOR CONTINUING CONNECTED TRANSACTIONS
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AMENDMENT TO EXISTING NON-COMPETE UNDERTAKING
The Company entered into the Supplemental Agreement with CNOOC on 8 December
2005 to amend the Existing Non-Compete Undertaking, whereby provided that it
obtains the Company's prior written consent, CNOOC and/or its subsidiaries
will be able to engage in the Businesses that are otherwise subject to the
Existing Non-Compete Undertaking as described below. No consideration is
payable by either party for entering into the Supplemental Agreement.
In addition, under the Supplemental Agreement, CNOOC has also irrevocably
granted an option to the Company to acquire the relevant Business from CNOOC
and/or its subsidiaries that are the subject of the consent. Such call option
will be granted to the Company for no consideration, for an indefinite period,
and will be exercisable by the Company at any time in the future. Therefore,
even after such consent is given, the Company may at any time in the future
acquire the relevant Businesses back from CNOOC and/or its subsidiaries.
The Board considers that the terms of the amendment to the Existing
Non-Compete Undertaking are on normal commercial terms, fair and reasonable
and are in the interests of the Company and the Shareholders as a whole.
REVISED CAP FOR EXISTING CONTINUING CONNECTED TRANSACTION
Reference is made to 2002 Circular in relation to certain continuing connected
transactions between the Group and CNOOC and/or its associates. These
continuing connected transactions include the provision of technical services
by CNOOC and/or its associates to the Group as described below.
CNOOC, which indirectly owns approximately 70.64% of the issued share capital
of the Company, is the controlling shareholder of the Company. Accordingly,
CNOOC is a connected person of the Company and transactions between CNOOC
and/or its associates and the Group constitute connected transactions for the
Company for the purpose of the Listing Rules. The Independent Shareholders had
approved the continuing connected transactions at an extraordinary general
meeting of the Company held on 23 December 2002.
The value of the categories of continuing connected transactions involving the
provision of technical services by associates of CNOOC is subject to an annual
cap. It is also a condition of the waiver that if any of the annual cap is
exceeded, the Company will comply with the provisions of the then Chapter 14
(currently Chapter 14A) of the Listing Rules relating to connected
transactions, unless it applies for and obtains a waiver from the Stock
Exchange.
The Directors had also been monitoring the Company's continuing connected
transactions and with the continued development of the Group and based on
internal estimates of the demand and the operating conditions of the
continuing connected transactions, the Directors note that the existing cap
for 2005
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for one of the continuing connected transactions category under the Existing
Waiver, namely, the provision of technical services, will not be sufficient
for the Group's requirement, and therefore propose that the existing cap for
the continuing connected transaction involving the provision of technical
services be revised.
NEW CATEGORISATION FOR CONTINUING CONNECTED TRANSACTIONS
The Independent Shareholders had approved the continuing connected
transactions between the Group and CNOOC and/or its associates using the
Existing Categorisation at an extraordinary general meeting of the Company
held on 23 December 2002 and the Existing Waiver was granted to the Company in
relation to these continuing connected transactions. The Existing Waiver will
expire on 31 December 2005 and the Company will, in accordance with the
requirements of the Listing Rules, seek Independent Shareholders' approval for
the Non-Exempt Continuing Connected Transactions and the respective Proposed
Caps, as described below.
The Company has undertaken an extensive review of the categorization of the
continuing connected transactions using the Existing Categorisation with a
view to presenting a more coherent, logical and understandable picture to
shareholders, and also to enable the Company to monitor the status of
transactions following each category more effectively going forward. New
Categories of continuing connected transactions have now been identified which
achieve this purpose, further details of the New Categories of the continuing
connected transactions are set out in paragraphs headed "New Categories of
Continuing Connected Transactions under the Comprehensive Framework
Agreements" of this announcement.
The Company proposes to enter into the following continuing connected
transaction with CNOOC and/or its associates, as set out in the Comprehensive
Framework Agreements, which are categorised using the New Categories. The
Directors expect that the Company will continuously enter into transactions
with CNOOC and/or its associates as described below, which will constitute
continuing connected transactions for the Company under the Listing Rules.
An Independent Board Committee has been formed to advise the Independent
Shareholders in connection with the terms of the amendment to the Existing
Non-Compete Undertaking, the Revised Cap for the "technical services" category
of continuing connected transaction and the Non-Exempt Continuing Connected
Transactions (including the Proposed Caps), and Dao Heng Securities Limited
has been appointed as the Independent Financial Adviser to advise the
Independent Board Committee and the Independent Shareholders on the same.
A circular containing, amongst other things, further information on the terms
of the amendment to the Existing Non-Compete Undertaking, the Revised Cap for
the "technical services" category of continuing connected transaction and the
New Categories of continuing connected transactions, a letter from the
Independent Board Committee, an opinion of Dao Heng Securities Limited, the
Independent Financial Advisor, together with a notice to convene an
extraordinary general meeting to approve, among other things, the amendment to
the Existing Non-Compete Undertaking, the Revised Cap for the "technical
services" category of continuing connected transaction and the Non-Exempt
Continuing Connected Transactions (including the Proposed Caps), is expected
to be issued to the Shareholders on or around 10 December 2005.
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AMENDMENT TO EXISTING NON-COMPETE UNDERTAKING
Background to the Existing Non-Compete Undertaking
Before the Company's listing in 2001, the Company's controlling shareholder,
CNOOC, gave various undertakings to the Company, which includes, amongst
others:
(i) that the Group will enjoy the exclusive right to exercise all of CNOOC's
commercial and operational rights under PRC law and regulations relating
to the exploration, development, production and sales of the PRC
offshore oil and natural gas; and
(ii) that neither it nor any of its subsidiaries will engage or be
interested, directly or indirectly, in oil and natural gas exploration,
development, production and sales in or outside the PRC.
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The Supplemental Agreement
Amendment to Existing Non-Compete Undertaking
The Company entered into the Supplemental Agreement with CNOOC on 8 December
2005 to amend the Existing Non-Compete Undertaking, whereby provided that it
obtains the Company's prior written consent, CNOOC and/or its subsidiaries
will be able to engage in the Businesses that are otherwise subject to the
Existing Non-Compete Undertaking. No consideration is payable by either party
for entering into the Supplemental Agreement.
The decision as to whether to give consent to CNOOC to engage in such
Businesses will be made by the Board. The independent non-executive Directors
will participate in making such decision and the reasons of the Board
(including those of the independent non-executive Directors) for giving the
written consent will be set out in an announcement, if such consent is given
and CNOOC engages in such Business.
Call option to acquire back the Business
In addition, under the Supplemental Agreement, CNOOC has also irrevocably
granted an option to the Company to acquire the relevant Business from CNOOC
and/or its subsidiaries that are the subject of the consent. Such call option
will be granted to the Company for no consideration, for an indefinite period,
and will be exercisable by the Company at any time in the future. Therefore,
even after such consent is given, the Company may at any time in the future
acquire the relevant Business back from CNOOC and/or its subsidiaries. The
consideration for the acquisition of the relevant Businesses will be
negotiated on arms-length negotiation and on normal commercial terms, and the
parties will enter into formal sale and purchase agreement in relation to such
acquisition. The exercise of the call option and the acquisition of the
relevant Businesses will constitute a connected transaction and the Company
will comply with the requirements of Chapter 14 and 14A of the Listing Rules
(as appropriate) upon the exercise of the call option.
Conditions
The Supplemental Agreement is conditional upon the approval by the Independent
Shareholders of the terms of the amendment to the Existing Non-Compete
Undertaking as required under the Listing Rules.
Reasons for and Benefits of the Amendment to the Existing Non-Compete
Undertaking
The Existing Non-Compete Undertaking does not currently provide for any
mechanism by which CNOOC may take up opportunities even if the Company decides
that it is not in its best interest to pursue them. The Board believes that
the amendment to the Existing Non-Compete Undertaking will give flexibility to
the Company and CNOOC in handling transactions, and will also improve the
relationship between the Company and CNOOC and CNOOC's continued support to
the Company. The Board also believes that the existence of a call option will
adequately protect the Company and ensure that the Company can share in the
opportunity if the Board considers at a later stage that it would be in the
interests of the Company to undertake such Businesses.
The Board considers that the terms of the amendment to the Existing
Non-Compete Undertaking are on normal commercial terms, fair and reasonable
and are in the interests of the Company and the Shareholders as a whole.
REVISED CAP FOR EXISTING CONTINUING CONNECTED TRANSACTION
Background
Reference is made to the 2002 Circular in relation to certain continuing
connected transactions between the Group and CNOOC and/or its associates.
These continuing connected transactions include the provision of technical
services by CNOOC and/or its associates to the Group as described below.
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CNOOC, which indirectly owns approximately 70.64% of the issued share capital
of the Company, is the controlling shareholder of the Company. Accordingly,
CNOOC is a connected person of the Company and transactions between CNOOC
and/or its associates and the Group constitute connected transactions for the
Company for the purpose of the Listing Rules. The Independent Shareholders had
approved the continuing connected transactions at an extraordinary general
meeting of the Company held on 23 December 2002.
The value of the categories of continuing connected transactions involving the
provision of technical services by associates of CNOOC is subject to an annual
cap. It is also a condition of the waiver that if any of the annual cap is
exceeded, the Company will comply with the provisions of the then Chapter 14
(currently Chapter 14A) of the Listing Rules relating to connected
transactions, unless it applies for and obtains a waiver from the Stock
Exchange.
The Directors had also been monitoring the Company's continuing connected
transactions and with the continued development and expansion of the business
of the Group and based on internal estimates of the demand and the operating
conditions of the continuing connected transactions, the Directors note that
the existing cap for 2005 for one of the continuing connected transactions
under the Existing Categorisation, namely, the provision of technical
services, will not be sufficient for the Groupi|s requirement, and therefore
propose that the existing cap for the continuing connected transaction
involving the provision of technical services be revised.
Technical Services
Since the establishment of CNOOC, a number of specialised companies have been
formed by CNOOC to provide sub-contracting services for CNOOC's offshore oil
and gas production activities. These specialised companies have provided
services to the Group through bidding process.
In connection with the restructuring of the Company in preparation for its
initial public offering, CNOOC's associates transferred to the Group the
existing technical services agreements with the specialized companies. In
2002, the specialised companies novated these agreements to COSL, who has
since assumed the rights and obligations of the specialised companies
thereunder, except in relation to the provision of engineering and
construction services. The Group may terminate any of these agreements by
giving 30 days' written notice to COSL or the specialised companies, as the
case may be. The Group will continue to use the technical and labour services
provided by COSL and the specialised companies, including:
o offshore drilling;
o ship tugging, oil tanker transportation and security services;
o well survey, well logging, well cementation and other related technical
services;
o collection of geophysical data, ocean geological prospecting, and data
processing;
o platform fabrication service and maintenance; and
o design, construction, installation and test of offshore and onshore
production facilities.
For the two years ended 31 December 2004 and the six months ended 30 June
2005, the charges for such technical services payable to COSL (or its
predecessors, as the case may be) and the specialised companies, as the case
may be, were approximately RMB3,828 million, RMB6,362 million and RMB3,038
million, respectively. These costs are based on arm's length negotiations with
COSL and specialized companies on normal commercial terms or on terms no less
favourable than those available to independent third parties, under prevailing
local market conditions, including considerations such as volume of sales,
length of contracts, package of services, overall customer relationship and
other market factors and, in the case of the specialised companies, are based
on a bidding process.
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Revised Cap and rationale
The Board has considered and proposed that the following Revised Cap in
respect of the "technical services" category of continuing connected
transactions using the Existing Categorisation be set as the maximum annual
value of such transaction for the year ended 31 December 2005:
The
continuing Revised Cap for the
connected Annual limit in the financial year ended Basis of determination of the Revised Cap
transactions Historical amount Existing Waiver 31 December 2005 amount
Technical For the two years ended For the three years RMB7,218 million The annual Revised Cap for the provision of
services 31 December 2004 and the ended 31 December technical services by CNOOC and/or its
six months ended 30 June 2005, RMB5,853 associates to the Group has been determined
2005, RMB3,828 million, million, RMB7,338 with reference to previous transactions
RMB6,362 million and million and RMB4,880 conducted and transaction amounts in respect
RMB3,038 million, million, respectively of the provision of technical services by
respectively CNOOC and/or its associates to the Group;
the rapid expansion of the Group's
operations in 2005, including overseas
expansion and acquisitions, new discoveries
and new projects coming on stream
successfully; and increased cost of supplies
and raw materials, the Group's demand for
which had increased with its expansion. In
addition, there had been adjustments to
initial development plans, which resulted in
certain oil field development activities
being postponed from 2003 and 2004 to 2005.
These developments were not anticipated at
the time whenthe relevant annual cap was
determined. Based on the above, the
Directors are of the view that the cap
amount for such services should be revised
to RMB7,218 million for the financial year
ending on 31 December 2005.
Reasons for and benefits of the "technical services" category of continuing
connected transactions
Prior to the restructuring of CNOOC and establishment of the Company, CNOOC
and/or its associates and the Group operated as an integrated organisation
which undertook numerous intra-group transactions each year. As a consequence
of the restructuring and upon the listing of the Company's shares on the Stock
Exchange, a number of transactions which have been entered into and which are
to be entered into between the Group and CNOOC and/or its associates will
constitute continuing connected transactions for the Company under the Listing
Rules.
The provision of technical services under the Existing Categorisation of
continuing connected transaction are and will be conducted in the ordinary and
usual course of business of the Company. This category of transaction will
continue to be agreed on an arm's length basis with terms that are fair and
reasonable to the Company. Due to the long-term relationship between the Group
and the CNOOC Group, the Board considers it to be beneficial to the Company to
continue to enter into the continuing connected transactions as these
transactions have facilitated and will continue to facilitate the operation
and growth of the Company's business.
The Board considers that the "technical services" category of continuing
connected transactions under the Existing Waiver have been conducted on normal
commercial terms or on terms no less favourable than those available to
independent third parties, under prevailing local market conditions, and were
entered into in the ordinary and usual course of business of the Group, are
fair and reasonable and in the interests of the Company and our shareholders
as a whole, and that the Revised Cap for the "technical services" category of
continuing connected transactions are fair and reasonable.
Disclosure and Independent Shareholders' approval requirements
Under the Listing Rules, the above "technical services" category of continuing
connected transactions
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is subject to the reporting, announcement and Independent Shareholders'
approval requirements. The Company will seek the Independent Shareholders'
approval at the Extraordinary General Meeting for the Revised Cap on the
condition that:
1. the annual amount of the "technical services" category of continuing
connected transactions under the Existing Waiver shall not exceed the
Revised Cap;
2. (i) the above continuing connected transaction will be entered into in
the usual and ordinary course of businesses of the Group and either (A)
on normal commercial terms or (B) if there is no available comparison,
on terms no less favourable to the Group than terms available from
independent third parties; and
(ii) the above continuing connected transaction will be entered into in
accordance with the relevant agreements and on terms that are fair and
reasonable and in the interests of the Shareholders as a whole.
The Company will comply with relevant provisions of the Listing Rules in
relation to the above continuing connected transaction.
NEW CATEGORISATION FOR CONTINUING CONNECTED TRANSACTIONS
Background
The Independent Shareholders had approved certain continuing connected
transactions between the Group and CNOOC and/or its associates using the
Existing Categorisation at an extraordinary general meeting of the Company
held on 23 December 2002 and the Existing Waiver was granted to the Company in
relation to these continuing connected transactions. The Existing Waiver will
expire on 31 December 2005 and the Company will, in accordance with the
requirements of the Listing Rules, seek Independent Shareholders' approval for
the Non-Exempt Continuing Connected Transactions and the respective Proposed
Caps, as described below.
The Company has undertaken an extensive review of the categorization of the
continuing connected transactions using the Existing Categorisation with a
view to presenting a more coherent, logical and understandable picture to
shareholders, and also to enable the Company to monitor the status of
transactions following each category more effectively going forward. New
Categories of continuing connected transactions have now been identified which
achieve this purpose, further details of the New Categories of the continuing
connected transactions are set out in paragraphs headed "New Categories of
continuing connected transactions under the Comprehensive Framework
Agreements" below.
The Group proposes to enter into the following continuing connected
transactions with CNOOC and/or its associates, as set out in the Comprehensive
Framework Agreements, which are categorised using the New Categories. The
Directors expect that the Group will continuously enter into such transactions
with CNOOC and/or its associates as described below, which will constitute
continuing connected transactions for the Company under the Listing Rules.
New Categories of continuing connected transactions under the Comprehensive
Framework Agreements
The Company entered into a Comprehensive Framework Agreement on 8 December
2005 with each of CNOOC, COSL and OOECL for the provision (1) by the Group to
CNOOC and/or its associates and (2) by CNOOC and/or its associates to the
Group, of a range of products and services which may be required and requested
from time to time by either party and/or its associates in respect of the New
Categories of continuing connected transactions, the details of which are set
out below. The term of each of the Comprehensive Framework Agreements is for a
period of two years from 1 January 2006, and is conditional upon Independent
Shareholders' approval.
o Provision of exploration, oil and gas development, oil and gas production
as well as marketing, management and ancillary services by CNOOC and/or
its associates to the Group
(a) Exploration and support services;
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(b) Oil and gas field development and support services;
(c) Oil and gas field production and support services;
(d) Marketing, management and ancillary services;
(e) FPSO vessel leases;
o Provision of management, technical, facilities and ancillary services,
including the supply of materials from the Group to CNOOC and/or its
associates;
o Sales of petroleum and natural gas products by the Group to CNOOC and/or
its associates
(a) Sales of petroleum and natural gas products;
(b) Long term Sales of natural gas and liquefied natural gas.
Since the establishment of CNOOC, certain associates of CNOOC specialising in
exploration, oil and gas development, oil and gas production, as well as
marketing, management and ancillary services provided these services to the
Group through bidding process. The Group will continue to use these services
provided by associates of CNOOC, including but not limited to COSL, OOECL and
COBGL. CNOOC also provide certain of these services from time to time. The
services provided by CNOOC and/or its associates are set out below.
Provision of exploration, oil and gas development, oil and gas production as
well as marketing, management and ancillary services by CNOOC and/or its
associates to the Group
(a) Provision of exploration and support services to the Group
The services provided by CNOOC and/or its associates to the Group on
exploration operations include:
o well site survey;
o seismic data acquisition and processing;
o integrated exploration research services;
o exploration well operation;
o related technical services on exploration well;
o tow-boat, transportation and safety services; and
o other related technical and supporting services.
For the two years ended 31 December 2004 and the six months ended 30 June
2005, the charges for such exploration and payable to CNOOC and/or its
associates were approximately RMB854 million, RMB1,330 million and RMB428
million respectively.
(b) Provision of oil and gas development and support services to the Group
The services provided by CNOOC and/or its associates to the Group on oil and
gas development operations include:
o platform survey;
o drilling and completion well operation;
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o related technical services on drilling and completion;
o design, construction, installation and tuning of production facilities;
o shipping transportation;
o provision of materials;
o integrated research on development techniques; and
o other related technical and supporting services.
For the two years ended 31 December 2004 and the six months ended 30 June
2005, the charges for such oil and gas development services payable to CNOOC
and/or its associates were approximately RMB2,765 million, RMB4,681 million
and RMB2,513 million respectively.
(c) Provision of oil and gas production and support services to the Group
The services provided by CNOOC and/or its associates to the Group on oil and
gas production operations are set out below. In addition, the scope of
business of these companies also include various facilities and ancillary
services, such as provision of different types of materials, medical and
employee welfare services, maintenance and repair of major equipments and
supply of water, electricity and heat to the Group, some of which may not be
available from independent third parties or available on comparable terms.
o integrated research on production techniques;
o well workover;
o shipping transportation;
o oil tanker transportation;
o provision of materials;
o maintenance of platform;
o repair of equipment and pipeline;
o production operations;
o oil and gas production labour services;
o warehousing and storage;
o lease of equipment and building;
o road transportation services;
o telecommunication and network services;
o wharf services;
o construction services, including roads, wharf, buildings, factories and
water barrier;
o maintenance and repair of major equipment;
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o medical, childcare and social services;
o provision of water, electricity and heat;
o security and fire services;
o technical training;
o accommodation;
o maintenance and repair of buildings;
o catering services; and
o other related technical and supporting services.
For the two years ended 31 December 2004 and the six months ended 30 June
2005, the charges for such oil and gas production services payable to CNOOC
and/or its associates were approximately RMB1,177 million, RMB1,354 million
and RMB575 million respectively.
(d) Provision of marketing, management and ancillary services to the Group
CNOOC and/or its associates provide marketing, administration and management,
management of oil and gas operations and integrated research services to the
Group, as well as other ancillary services relating to the exploration,
development, production and research activities of the Group. Details of these
services are set out below:
o marketing services;
o management;
o staff recruitment;
o publishing;
o telecommunications;
o leases of properties;
o property management;
o water, electricity and heat supply;
o car rental;
o integrated services such as record keeping, filing, repair of computer,
catering and photocopying; and
o integrated research.
For the two years ended 31 December 2004 and the six months ended 30 June
2005, the charges for other marketing, management and ancillary services
excluding leases of properties and property management payable to CNOOC and/or
its associates were approximately RMB134 million, RMB249 million and RMB81
million respectively.
In addition, as part of providing administration and management services to
the Group, CNOOC and/or its associates leased certain premises covering an
aggregate area of approximately 50,000 square meters, located throughout the
PRC and in Singapore, to the Group for use as office premises and staff
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quarters. In addition to leasing these properties, CNOOC and/or its associates
also provided management services in respect of certain properties leased to
the Group. CNOOC and/or its associates which own one or more of the leased
buildings have entered into individual lease and/or management agreements with
the Company. Each agreement is in writing and for a term of less than three
years.
CNOOC has also recently completed construction of a new office building in the
Dongcheng District in Beijing, PRC which the Group may lease certain parts of
as its new headquarter from January 2006. As its business continues to expand,
the Group may, subject to the annual caps below, also enter into additional
leases and management agreements with CNOOC and/or its associates from time to
time.
For the two years ended 31 December 2004 and the six months ended 30 June
2005, the aggregate rentals and management fees payable by the Group were
approximately RMB56.87 million, RMB76.72 million and RMB23.78 million,
respectively. Sallmanns (Far East) Limited, an independent property valuer,
has confirmed that the payments due under each of the lease agreements and the
management agreement reflect the fair and reasonable commercial market rent
and management fee, respectively.
For the two years ended 31 December 2004 and the six months ended 30 June
2005, the aggregate charges for marketing, management and ancillary services
(including leasing and management of properties) payable to CNOOC and/or its
associates were approximately RMB191 million, RMB326 million and RMB105
million respectively.
Pricing of transactions relating to services provided by CNOOC and/or its
associates to the Group under paragraphs (a) to (d) above
The continuing connected transactions referred to in paragraphs (a) to (d)
above relate to services provided by CNOOC and/or its associates to the Group.
In general, the services provided by CNOOC and/or its associates to the Group
are based on arm's length negotiations with CNOOC and/or its associates on
normal commercial terms, or on terms no less favourable than those available
to independent third parties, under prevailing local market conditions,
including considerations such as volume of sales, length of contracts, package
of services, overall customer relationship and other market factors.
If, for any reason, the above pricing principle for a particular product or
service ceases to be applicable or there is no open market for such services,
whether due to a change in circumstances or otherwise, such product or service
must then be provided in accordance with the following general pricing
principles:
(i) state-prescribed prices; or
(ii) where there is no state-prescribed price, market prices, including the
local, national or international market prices; or
(iii) when neither (i) nor (ii) is applicable, the cost to CNOOC and/or its
associates for providing the relevant product or services (including the
cost of sourcing or purchasing from third parties) plus a margin of not
more than 10%, before any applicable taxes.
The Company expects that the costs relating to any future contract with CNOOC
and/or its associates will be on a similar basis.
It is envisaged that from time to time and as required, individual agreements
will be entered into between CNOOC and/or its associates and the Group,
providing the relevant products or services and the relevant members of the
Group requiring such products or services.
Each agreement will set out the specific products and services requested by
the relevant party and any detailed technical and other specifications which
may be relevant to those products or services. The agreements may only contain
provisions which are in all material respects consistent with the guidelines
and terms and conditions as set out above.
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(e) FPSO vessel lease agreements
The Group leases floating production, storage and offloading (FPSO) vessel
from COBGL for use in oil and gas production operations at market prices on
normal commercial terms which are calculated on a daily basis. FPSO vessels
are usually located next to the offshore oil platforms and are an integrated
facility used by the Group during its offshore oil and gas production for
processing, storage and channelling of crude oil. The terms of FPSO vessel
leases are usually determined based on the expected term of oil and gas
exploration, development and production. The Company currently leases a FPSO
vessel for a term of 20 years from an associate of CNOOC, with such term being
determined based on the expected term of oil and gas exploration, development
and production. The Directors expects that the Group may enter into other FPSO
leases with CNOOC and/or its associates from time to time as the operations of
the Group expands. The Comprehensive Framework Agreements provide that if the
Company fails to obtain approval of the annual caps for this category of
continuing connected transactions after 31 December 2007, then the agreements
falling under this category will terminate on that date. For the year ended 31
December 2004 and the six months ended 30 June 2005, the aggregate rentals
payable by the Group were approximately RMB51.97 million and RMB74.07 million,
respectively. There were no such transactions for the year ended 31 December
2003.
Provision of management, technical, facilities and ancillary services,
including the supply of materials to CNOOC and/or its associates
In addition to providing various services to the Group, CNOOC and/or its
associates may also utilise various types of management, facilities and
ancillary services, including the supply of materials provided by the Group
from time to time. The pricing for such services will be determined based on
the same pricing principles applicable to transactions relating to services
provided by CNOOC and/or its associates to the Group under paragraph (a) and
(d) above, which will be negotiated and agreed on normal commercial terms
between the parties. The services that may be provided by the Group to CNOOC
and/or its associates include:
o technical consulting;
o technology transfer;
o management;
o technical research services; and
o other supporting services.
There have been no such transactions for the two years ended 31 December 2004
and the six months ended 30 June 2005. However, the development of CNOOC
towards a world-class integrated energy company requires it to continue to
optimize its industrial chain. To facilitate such development, it is
anticipated that CNOOC requires the provisions of technical consulting,
technical transfer, management services, technical research services and other
related services from the Group and the Group may provide certain of these
services to CNOOC and/or its associates in the near future.
Sales of petroleum and natural gas products by the Group to CNOOC and/or its
associates
(a) Sales of petroleum and natural gas products
The Group may sell petroleum and natural gas products, including crude oil,
condensate oil, liquefied petroleum gas, natural gas and liquefied natural
gas, to CNOOC and/or its associates which engage in downstream petroleum
business at state-prescribed prices or local, national or international market
prices and on normal commercial terms. It is envisaged that individual sales
contract will be entered into from time to time between the Group and CNOOC
and/or its associates in relation to such sales. Although most of the natural
gas and liquefied natural gas will be sold under the long term sales contracts
as described below, the Group also sells certain volume of the natural gas and
liquefied natural gas to CNOOC and/or its associates on short-term basis for
the purpose of peak adjustment and to reap higher profits.
12
For the two years ended 31 December 2004 and the six months ended 30 June
2005, sales of petroleum and natural gas products to CNOOC and/or its
associates were approximately RMB8,324 million, RMB13,630 million and
RMB11,837 million respectively.
(b) Long term sales of natural gas and liquefied natural gas
The Group sells natural gas to CNOOC and/or its associates which engage in the
downstream petroleum business at state-prescribed prices or local, national or
international market prices and on normal commercial terms, which is subject
to adjustment in accordance with movements in international oil prices as well
as other factors such as the term of the sales agreement and length of the
relevant pipeline. Due to the size of investment and the fact that sales are
usually made to markets proximate to the exploration site, and that purchasers
tend to utilize the natural gas products in areas close to the exploration
site, and in order to ensure the return on investment from exploration of
natural gas, the Group will usually enter into long term sales contracts with
a term of 15 to 20 years. It is market practice for the term of the sales
contract to be determined based on the estimated reserves and production
profile of the relevant gas fields.
The Group has also invested and acquired interests in liquefied natural gas
related upstream projects in Tangguh, Indonesia and the North West Shelf of
Australia. It is envisaged that from time to time the Group may sell liquefied
natural gas explored from these gas reserves mentioned above and other gas
reserves in which the Group may invest in the future to CNOOC and/or its
associates. In order to ensure the return on investment and to achieve the
requirement of the lenders, it is anticipated that the terms of sales
contracts in relation to the liquefied natural gas will be around 25 years.
The Group may sell liquefied natural gas to CNOOC and/or its associates which
engage in the downstream petroleum business at state-prescribed prices or
local, national or international market prices and on normal commercial terms
taking into account the term of the sales contract.
It is envisaged that individual sales contracts will be entered into from time
to time between the Group and CNOOC and/or its associates in relation to such
sales, with a term not exceeding 25 years. The Comprehensive Framework
Agreements provide that if the Company fails to obtain approval of the annual
caps for this category of continuing connected transactions after 31 December
2007, then the agreements falling under this category will terminate on that
date.
For the year ended 31 December 2004 and the six months ended 30 June 2005,
long term sales of natural gas to CNOOC and/or its associates were
approximately RMB315 million and RMB272 million respectively. There were no
such transactions for the year ended 31 December 2003. For the two years ended
31 December 2004 and the six months ended 30 June 2005, there have been no
sales of liquefied natural gas to CNOOC and/or its associates.
Reasons for and benefits of the New Categories of continuing connected
transactions
Prior to the restructuring of CNOOC and establishment of the Company, CNOOC
and/or its associates and the Group operated as an integrated organisation
which undertook numerous intra-group transactions each year. As a consequence
of the restructuring and upon the listing of the Company's shares on the Stock
Exchange, a number of transactions which have been entered into and which are
to be entered into between the Group and CNOOC and/or its associates will
constitute continuing connected transactions for the Company under the Listing
Rules.
The New Categories of continuing connected transactions as referred to in this
announcement are and will be conducted in the ordinary and usual course of
business of the Company. These transactions will continue to be agreed on an
arm's length basis with terms that are fair and reasonable to the Company. Due
to the long-term relationship between the Group and the CNOOC Group, the Board
considers it to be beneficial to the Company to continue to enter into the
continuing connected transactions as these transactions have facilitated and
will continue to facilitate the operation and growth of the Company's
business.
The Board considers that all the above New Categories of continuing connected
transactions have been conducted on normal commercial terms, or on terms no
less favourable than those available to independent third parties, under
prevailing local market conditions, and were entered into in the ordinary and
usual course of business of the Group, are fair and reasonable and in the
interests of the
13
Company and our shareholders as a whole, and that the annual cap for each of
the above New Categories of continuing connected transactions are fair and
reasonable.
Proposed Caps and rationale
The Board has considered and proposed that the following Proposed Caps in
respect of the New Categories of continuing connected transactions set as the
maximum annual value of the relevant transactions above for the period from 1
January 2006 to 31 December 2007:
The continuing Historical amount/ Basis of determination of the Proposed
connected transactions Estimate for 2005 Proposed Caps Caps
Provision of exploration, oil and gas development, oil and gas production as well as marketing, management and ancillary
services by CNOOC and/or its associates to the Group
(a) Exploration and For the two years ended For the two years ending The annual proposed caps for the
support services 31 December 2004 and the 31 December 2007, exploration and support services have
six months ended 30 June RMB2,117 million and been determined with reference to
2005, RMB854 million, RMB2,293, respectively previous transactions conducted and
RMB1,330 million and transaction amounts in respect of the
RMB428 million, exploration and support services
respectively provided by CNOOC and/or its associates
to the Group; the estimated increase in
the level of exploration activities by
Estimated to be RMB1,538 the Group within the PRC; and the
million for the year expansion of overseas risk survey. The
ended 31 December 2005 Directors are of the view that the
proposed caps provide sufficient
increment for the Group to capture the
Group's future anticipated expansion
plan.
(b) Oil and gas field For the two years ended For the two years ending The annual proposed caps for the oil and
development and support 31 December 2004 and the 31 December 2007, gas field development and support
services six months ended 30 June RMB7,628 million and services have been determined with
2005, RMB2,765 million, RMB10,458 million reference to previous transactions
RMB4,681 million and respectively conducted and transaction amounts in
RMB2,513 million, respect of the oil and gas field
respectively development and support services
provided by CNOOC and/or its associates
to the Group; and the estimated
expansion of existing oilfields and the
Estimated to be RMB4,789 development of several newly discovered
million for the year oilfields offshore China. The Directors
ended 31 December 2005 are of the view that the proposed caps
provide sufficient increment for the
Group to capture the Group's future
anticipated expansion plan.
(c) Oil and gas field For the two years ended For the two years ending The annual proposed caps for the oil and
production and support 31 December 2004 and the 31 December 2007, gas field production and support
services six months ended 30 June RMB3,935 million and services have been determined with
2005, RMB1,177 million, RMB4,132, respectively reference to previous transactions
RMB1,354 million and conducted and transaction amounts in
RMB575 million, respect of the oil and gas field
respectively production and support services provided
by CNOOC and/or its associates to the
Group; and the estimated growth of the
Estimated to be RMB2,068 Group's business, including the
million for the year estimated expansion of existing
ended 31 December 2005 oilfields and the development of several
newly discovered oilfields offshore
China. The Directors are of the view
that the proposed caps provide
sufficient increment for the Group to
capture the Group's future anticipated
expansion plan.
(d) Marketing, For the two years ended For the two years ending The annual proposed caps for marketing,
management and 31 December 2004 and the 31 December 2007, RMB478 management and ancillary services have
ancillary services six months ended 30 June million and RMB504 been determined with reference to
2005, RMB191 million, million, respectively previous transactions conducted and
RMB326 million and RMB105 transaction amounts in respect of the
million, respectively marketing, management and ancillary
services provided by CNOOC and/or its
associates to the Group; the continued
14
Estimated to be RMB443 expansion of the Group's business and
million for the year sales of oil and gas; and the potential
ended 31 December 2005 increase in staffing. The Directors are
of the view that the proposed caps
provide sufficient increment for the
Group to capture the Group's future
anticipated expansion plan.
(e) FPSO vessel leases For the year ended 31 For the two years ending The annual proposed caps for the FPSO
December 2004 and the six 31 December 2007, RMB453 leases have been determined with
months ended 30 June million and RMB463 reference to previous transactions
2005, RMB51.97 million million, respectively conducted and transaction amounts in
and RMB74.07 million, respect of the FPSO leases provided by
respectively CNOOC and/or its associates to the
Group; and the estimated increase in the
Estimated to be RMB149 number of oil fields requiring FPSO
million for the year vessels. The Directors are of the view
ended 31 December 2005 that the proposed caps provide
sufficient increment for the Group to
capture the Group's future anticipated
expansion plan.
Provision of management, technical, facilities and ancillary services, including the supply of materials from the Group to CNOOC
and/or its associates
Provision of management, There have been no such For the two years ending The annual proposed caps for the
technical, facilities and transactions for the two 31 December 2007, RMB50 provision of management, technical,
ancillary services, years ended 31 December million and RMB100 facilities and ancillary services,
including the supply of 2004 and the six months million, respectively including the supply of materials to
materials to CNOOC and/or ended 30 June 2005 CNOOC and/or its associates have been
its associates determined with reference to the
It is expected those will anticipated need by CNOOC and/or its
be no such transactions associates for the provision of such
for the year ended 31 services as a result of CNOOC's need to
December 2005 optimize its industrial chain to
facilitate its development towards a
world-class integrated energy company.
The Directors are of the view that the
proposed caps provide sufficient
flexibility for the Group's future
anticipated business activities.
Sales of petroleum and natural gas products by the Group to CNOOC and/or its associates
(a) Sales of petroleum For the two years ended For the two years ending The annual proposed caps for sales of
and natural gas products 31 December 2004 and the 31 December 2007, petroleum and natural gas products by
six months ended 30 June RMB33,469 million and the Group to CNOOC and/or its associates
2005, RMB8,324 million, RMB44,199 million, have been determined with reference to
RMB13,630 million and respectively historical transactions and transaction
RMB11,837 million, amounts in respect of the sales of
respectively petroleum and natural gas products by
the Group to CNOOC and/or its
Estimated to be RMB28,320 associates; the ongoing development of
million for the year existing oilfields and the development
ended 31 December 2005 of several new oilfields offshore China;
the estimated resultant increase in
sales; and the potential fluctuation and
increase in the prices of crude oil. The
increases in such cap amounts also took
into account the fact that crude oil
from new oilfields, which is expected to
be made up of a higher proportion of
heavy crude oil, needs to undergo
refining processes which are carried out
primarily by CNOOC and/or its
associates. The Directors are of the
view that the proposed caps provide
sufficient increment for the Group to
capture the Group's future anticipated
expansion plan.
(b) Long term sales of For the year ended 31 For the two years ending The annual proposed caps for sales of
natural gas and liquefied December 2004 and the six 31 December 2007, petroleum and natural gas products by
natural gas months ended 30 June RMB1,960 million and the Group to CNOOC and/or its associates
2005, RMB315 million and RMB3,599 million, have been determined with reference to
RMB272 million, respectively historical transactions and transaction
respectively amounts in respect of the sales of
petroleum and natural gas products by
Estimated to be RMB563 the Group to CNOOC and/or its
associates;
15
million for the year the ongoing development of existing
ended 31 December 2005 oilfields and the development of several
new oilfields in offshore China; the
estimated resultant increase in sales;
and the potential fluctuation and
increase in the prices of natural gas.
The Directors are of the view that the
proposed caps provide sufficient
increment for the Group to capture the
Group's future anticipated expansion
plan.
Disclosure and/or Independent Shareholders' approval requirements
Under the Listing Rules, the following categories amongst the New Categories
of continuing connected transactions are exempted from the Independent
Shareholders' approval requirement but are subject to the reporting and
announcement requirements set out in Rules 14A.45 to 14A.47 of the Listing
Rules, as each of the percentage ratios (other than the profits ratio), where
applicable, in relation of each of these categories is, on a an annual basis,
expected to be less than 2.5% under Rule 14A.34(1) of the Listing Rules:
o Marketing, management and ancillary services;
o FPSO vessel leases; and
o Provision of management, technical, facilities and ancillary services,
including the supply of materials from the Group to CNOOC and/or its
associates.
Under the Listing Rules, the Non-Exempt Continuing Connected Transactions are
subject to the reporting, announcement and Independent Shareholders' approval
requirements. The Company will seek the Independent Shareholders' approval at
the Extraordinary General Meeting for the Non-Exempt Continuing Connected
Transactions and the applicable Proposed Caps on the condition that:
1. The annual amount of each category of the Non-Exempt Continuing
Connected Transactions shall not exceed the applicable Proposed Cap;
2. (i) The Non-Exempt Continuing Connected Transactions will be entered
into in the usual and ordinary course of businesses of the Group and
either (A) on normal commercial terms or (B) if there is no available
comparison, on terms no less favourable to the Group than terms
available from independent third parties; and
(ii) The Non-Exempt Continuing Connected Transactions will be entered
into in accordance with the relevant Comprehensive Framework Agreements
and on terms that are fair and reasonable and in the interests of the
Shareholders as a whole.
The Company will comply with relevant provisions of the Listing Rules in
relation to each category of the Non-Exempt Continuing Connected Transactions.
APPROVAL BY INDEPENDENT SHAREHOLDERS
As CNOOC indirectly owns an aggregate of approximately 70.64% of the issued
share capital of the Company, the amendment to the Existing Non-Compete
Undertaking, the Revised Cap for the "technical services" category of
continuing connected transaction and the Non-Exempt Continuing Connected
Transactions (including the Proposed Caps) are subject to approval from the
Independent Shareholders under the Listing Rules. In view of the interests of
CNOOC held indirectly through OOGC and CNOOC BVI, OOGC, CNOOC BVI and their
respective associates will abstain from voting in relation to the resolutions
approving the amendment to the Existing Non-Compete Undertaking, the Revised
Cap for the "technical services" category of continuing connected transaction
and the Non-Exempt Continuing Connected Transactions (including the Proposed
Caps).
An Independent Board Committee has been formed to advise the Independent
Shareholders in connection with the terms of the amendment to the Existing
Non-Compete Undertaking, the Revised
16
Cap for the "technical services" category of continuing connected transaction
and the Non-Exempt Continuing Connected Transactions (including the Proposed
Caps), and Dao Heng Securities Limited has been appointed as the Independent
Financial Adviser to advise the Independent Board Committee and the
Independent Shareholders on the same.
GENERAL
The principal business activity of the Company is investment holding. The
Group principally engages in the exploration, development, production and
sales of crude oil and natural gas and other petroleum products.
The CNOOC Group principally engages in the provision of technical services,
logistic services, chemicals and fertilizer production, natural gas and power
generation, and financial services.
A circular containing, amongst other things, further information on the terms
of the amendment to the Existing Non-Compete Undertaking, the Revised Cap for
the "technical services" category of continuing connected transaction and the
New Categories of continuing connected transactions, a letter from the
Independent Board Committee, an opinion of Dao Heng Securities Limited, the
Independent Financial Advisor, together with a notice to convene an
extraordinary general meeting to approve, among other things, the amendment to
the Existing Non-Compete Undertaking, the Revised Cap for the "technical
services" category of continuing connected transaction and the Non-Exempt
Continuing Connected Transactions (including the Proposed Caps), is expected
to be issued to the Shareholders on or around 10 December 2005.
DEFINITIONS
"2002 Circular" the circular issued by the Company to its shareholders
in respect of the Existing Waiver for the Ongoing
Connected Transaction dated 9 December 2002
"associate" has the meaning ascribed thereto under the Listing Rules
"Board" the board of Directors of the Company
"Business" exploration, development, production and sales of
crude oil, natural gas and natural gas liquids
deposited underground in and outside the PRC
"Company" CNOOC Limited, a company incorporated in Hong Kong
with limited liability, the shares of which are listed
on the Stock Exchange
"CNOOC" China National Offshore Oil Corporation [CHINESE
CHARACTERS OMITTED], the controlling shareholder of the
Company indirectly holding approximately 70.64% of all
of the Shares in issue as at the date hereof
"CNOOC BVI" CNOOC (BVI) Limited, a company incorporated in
the British Virgin Islands with limited liability, a
wholly-owned indirect subsidiary of CNOOC and the
controlling shareholder of the Company
"CNOOC Group" CNOOC and its subsidiaries (excluding the Group)
"COBGL" CNOOC Oil Base Group Limited [CHINESE CHARACTERS
OMITTED], a company incorporated in the PRC and a
subsidiary of CNOOC
"Comprehensive the Comprehensive Framework Agreements dated 8 December
Framework 2005 entered into between the Company and each of
Agreement(s)" CNOOC, COSL and OOECL in relation to the New Categories
of continuing connected transactions
"COSL" China Oilfield Services Limited [CHINESE CHARACTERS
OMITTED], a company listed on the main board of the
Stock Exchange and incorporated in the PRC, and a
subsidiary of CNOOC
"Director(s)" director(s) of the Company
"Extraordinary the extraordinary general meeting of the Company to be
General held to approve, among other things, the amendment to
Meeting" the Existing Non-Compete Undertaking, the Revised Cap
for the "technical services" category of continuing
connected
17
transaction and the Non-Exempt Continuing Connected
Transactions (including the Proposed Caps)
"Existing The undertaking agreement dated 6 April 2000 between the
Non-Compete Company and CNOOC, as supplemented by a supplemental
Undertaking" agreement dated 21 December 2000, in relation to the
non-compete undertakings given by CNOOC for the
purposes of the Company's listing on the Stock Exchange
"Existing the existing categorisation for continuing connected
Categorisation" transactions between the Company and CNOOC and/or its
associates as set out in the 2002 Circular
"Existing Waiver" the waiver granted by the Stock Exchange in respect of
the existing categorisation of continuing connected
transactions between the Group and CNOOC and/or its
associates, subject to the conditions set out in the
2002 Circular
"Group" the Company and its subsidiaries from time to time
"Hong Kong" the Hong Kong Special Administrative Region of the PRC
"Independent Board an independent committee of the Board comprising of
Committee" Mr. Sung Hong Chiu, Mr. Kenneth S. Courtis, Mr. Evert
Henkes, Mr. Tse Hau Yin, Aloysius and Mr. Lawrence J.
Lau, the independent non-executive Directors, formed
for the purpose of advising the Independent
Shareholders in relation to the terms of the amendment
to the Existing Non-Compete Undertaking, the Revised
Cap for the "technical services" category of
continuing connected transaction and the Non-Exempt
Continuing Connected Transactions (including the
Proposed Caps)
"Independent Dao Heng Securities Limited, a corporation licensed to
Financial carry out type 1 (dealings in securities), type 4
Adviser" (advising on securities) and type 6 (advising on
corporate finance) regulated activities under the
Securities and Futures Ordinance (Chapter 571 of the
Laws of Hong Kong), is the independent financial
adviser to the Independent Board Committee and the
Independent Shareholders
"Independent shareholders of the Company other than CNOOC and its
Shareholders" associates
"Listing Rules" The Rules Governing the Listing of Securities on the
Stock Exchange (as amended from time to time)
"New Categories" the new categories of continuing connected
transactions between the Company and CNOOC and/or its
associates as set out in the section headed "New
Categories of continuing connected transactions under
the Comprehensive Framework Agreements" in this
announcement
"Non-Exempt the New Categories of continuing connected transactions
Continuing other than the categories "Marketing, management and
Connected ancillary services", "FPSO vessel leases", and
Transactions" "Provision of management, technical, facilities and
ancillary services, including the supply of materials
from the Group to CNOOC and/or its associates", as set
out in the section headed "New Categories of
continuing connected transactions under the
Comprehensive Framework Agreements" in this
announcement
"OOECL" Offshore Oil Engineering Co., Ltd. [CHINESE
CHARACTERS OMITTED], a company incorporated in the PRC
and listed on the Shanghai Stock Exchange, and a
subsidiary of CNOOC
"OOGC" Overseas Oil and Gas Corporation, Ltd, a company
incorporated in Bermuda with limited liability and a
wholly-owned subsidiary of CNOOC.
"PRC" The People's Republic of China, excluding for the
purpose of this announcement, Hong Kong, Macau and
Taiwan
"Proposed Cap(s)" the proposed maximum annual aggregate values for each
of the New Categories of continuing connected
transactions of the Company as set out in the
paragraph headed "Proposed Caps and Rationale" of this
announcement
"Revised Cap" the proposed maximum annual cap for the "technical
services" category of continuing connected
transactions of the Company using the Existing
Categorisation, as set out in the paragraph headed
"Revised Cap and Rationale" of this announcement
"Shares" share(s) of HK$0.02 each in the share capital of the
Company
"Shareholders" registered holder(s) of the Shares
"Stock Exchange" The Stock Exchange of Hong Kong Limited
"Supplemental the supplemental agreement dated 8 December 2005
Agreement" between the Company and CNOOC in relation to certain
amendments to the Existing Non-Compete Undertaking
As at the date of this announcement, the Board comprises of:
Executive Directors
Fu Chengyu (Chairman)
Luo Han
Zhou Shouwei
Cao Xinghe
Wu Zhenfang
Wu Guangqi
Yang Hua
Independent non-executive Directors
Sung Hong Chiu
Kenneth S. Courtis
Evert Henkes
Tse Hau Yin, Aloysius
Lawrence J. Lau
By Order of the Board
CNOOC Limited
Yunshi Cao
Company Secretary
Hong Kong, 8 December 2005
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
as amended, the registrant has duly caused this report on Form 6-K to be
signed on its behalf by the undersigned, thereunto duly authorized.
CNOOC Limited
By: /s/ Cao Yunshi
-----------------------------
Name: Cao Yunshi
Title: Company Secretary
Dated: December 9, 2005
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