"CNOOC is still small today and Russia is a big-boy game," chief financial officer Yang Hua said in Beijing yesterday. While the company is "looking closely at Russia with great interest," risks are "beyond manageable."

China, the world's biggest energy user after the United States, is encouraging its oil and gas producers to step up production to meet rising consumption, spurred by an economy that surged 11.5 percent in the third quarter. The International Energy Agency expects China's oil demand to increase 5.4 percent to 7.5 million barrels a day this year.

ADVERTISEMENT

"Acquisitions have to be a value creation for the company," Yang said. Offshore China, which accounts for almost 90 percent of CNOOC's oil and gas assets, will remain the "most important playground" for CNOOC, while the firm needs to diversify its geological risks, Yang said.

CNOOC shares fell 0.3 percent to HK$13.92 yesterday. The stock has gained 88 percent this year.

Nations rich in resources are exercising tightening control over foreign oil firms, making acquisitions more difficult, Yang said. In 2005 CNOOC failed in an attempted US$18.5 billion (HK$144 billion) bid to buy Unocal Corp because of opposition by US lawmakers.

"To me, I think the Unocal bid was a very stretched deal for CNOOC at that moment," he said, adding it would avoid any takeover bid that may hurt earnings. BLOOMBERG