Workers on an oil-drilling platform in the South China Sea. CNOOC is forming a joint venture with a private company for deep-water oil exploitation and exploration, in what is being seen as a major step forward in its plans for a more mixed-ownership structure. [Photo/Xinhua]

China National Offshore Oil Corporation, the country's largest offshore oil and gas producer, is forming a joint venture with a private company for deep-water oil exploitation and exploration, in what is being seen as a major step forward in its plans for a more mixed-ownership structure.

The venture, being created by CNOOC Energy Technology & Services Ltd and Shanghai-based MSP/DRILEX Inc, will increase the company's ability in deep-sea drilling equipment manufacturing and technology, CNOOC said in a statement.

MSP/DRILEX, which already provides engineering equipment and technical services for CNOOC's Bohai Bay offshore platform, had been a long-standing partner of China's oil majors, including China National Petroleum Corporation.

The latest move fits well with the overall reform plans of the country's State-owned energy organizations, which are likely to move toward mixed ownership in the future, and more such ventures are expected by CNOOC in both its upstream and downstream businesses.

Mixed-ownership plans are also likely from CNPC, the parent of PetroChina Co Ltd, and China Petrochemical Corporation, also known as Sinopec Group.

Operations in the resource-rich Xinjiang Uygur autonomous region in northwestern China are at the center of the State-owned energy companies' reforms.

A pilot project has been launched there by CNPC, which is expected to become the first where State assets are offered to private investors in the upstream oil exploration activities.

China's deep-water oil drilling market has long been dominated by foreign companies, as the manufacturing of equipment is expensive, labor-intensive and highly specialist, requiring advanced technologies.

"The company has been formed to develop deep-water drilling systems and to help localize the manufacturing of deep-water oil drilling equipment, produced under Chinese property rights," the CNOOC statement said.

Han Xiaoping, CEO of online energy information portal China5E.com, said that as the global oil prices continue on a downward trend, the new venture between CNOOC and MSP/DRILEX will help cut costs.

"The private company will have better innovation and cost-control capability, which gives the new mixed-ownership firm a competitive edge in pricing over its rivals," he said.

"It will also become easier for CNOOC to expand its overseas offshore oil equipment manufacturing, because many countries do not allow State-owned companies to participate in deep-sea activities," he said.