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China: Primeline, CNOOC expand East China Sea block

Primeline Energy Holdings Inc. has signed a petroleum contract with China National Offshore Oil Corp. covering Block 33/07 in the East China Sea.

The contract replaces the previous contract on Block 25/34, which covered the 84.7 sq km development and production area of LS36-1 gas field under which CNOOC Ltd. was operator with 51% interest and PEH and Primeline Petroleum Corp. held 36.75% and 12.25%, respectively.

Block 33/07 covers 1.45 million acres enclosing Block 25/34, and the contractor’s interest is shared 75%-25% by PEH and PPC. Another subsidiary, Primeline Energy Operations International Ltd., is operator of Block 33/07. PEOIL is responsible for 100% of exploration costs, and CNOOC has the right to participate, up to 51%, in any commercial development.

The new contract has a 7-year exploration period divided into three exploration phases of 3, 2, and 2 years, each with a minimum work commitment. The firm commitment in the first phase is for two exploratory wells and 600 sq km of 3D seismic. Any discoveries in the new contract area have the right to use the production facilities being built for LS36-1 gas field. Block 33/07 and Block 25/34 fiscal terms are identical.

Block 33/07 covers the majority of the Lishui basin where LS36-1 gas field is to begin producing in 2013. Primeline has 737 sq km of 3D seismic data in the block within which a number of potential prospects near LS36-1 have been mapped. Primeline also has extensive 2D seismic coverage over the rest of the block and has identified a number of exploration leads in this area.

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