By OGJ editors
HOUSTON, Sept. 23 -- PetroChina Co. Ltd. signed a production-sharing contract (PSC) with subsidiaries of Ivanhoe Energy Inc., Vancouver, BC, for joint venture development of natural gas reserves on the Zitong Block in the western portion of the Sichuan basin.
Ivanhoe's subsidiaries, Sunwing Energy Ltd., Calgary, and Pan-China Resources Ltd., Beijing, signed the 30-year PSC covering 900,000 acres with "gross resource potential" of 5 tcf, Ivanhoe said. The Sichuan basin is China's largest gas-producing region, with production of more than 800 MMcfd and an estimated 260 tcf in place, Chinese officials have said.
"This is the first of two very significant production-sharing contracts we expect to sign to exploit natural gas in the Sichuan basin," said David Martin, Ivanhoe's chairman. "The demand for clean-burning natural gas in China is expected to grow dramatically over the next decade. Ivanhoe will be clearly positioned to benefit from this trend."
A longtime oilman, Martin has had business relationships in China for 20 years, an Ivanhoe spokesman said. Ivanhoe, which was incorporated in 1995 as China Holdings Ltd., already participates in an enhanced oil recovery project north of Beijing.
The recent PSC was finalized after feasibility studies and independent engineering studies were completed as outlined in a memorandum of understanding between Sunwing Energy and Petrochina (OGJ Online, Feb. 13, 2001.)
In return for its investment and development expertise on Zitong Block, Ivanhoe will receive 80% of the revenue before costs are recovered and 45% after costs are fully recovered.
PetroChina participates as a partner in any successful developments, with a working interest of up to 51%. In addition to developing existing producing structures, Ivanhoe will conduct exploration activities, which will include acquiring new 2D seismic data, reprocessing existing seismic data, and drilling at least four exploratory wells over 6 years. Drilling could commence in late 2003.
Interpretation from existing 2D seismic data has identified 16 structures with hydrocarbon-bearing potential. Four wells are producing, and it is believed that larger potential exists from other zones in the producing well bores, Ivanhoe said.
In addition, pursuant to existing exclusive agreements, Ivanhoe has the right to negotiate for a PSC on the 1 million acre Yudong Block on the eastern edge of the Sichuan basin. Ivanhoe management expects these negotiations to begin before Dec. 31.