Exploration heating in South China Sea

The pace of exploration is picking up speed in the South China Sea off Viet Nam and China.

Mobil Corp. and partners signed a production sharing contract (PSC) with Viet Nam's state oil company Petrovietnam covering exploration and development of the prized Blue Dragon (Thanh Long) prospect.

Seagull Energy Corp., Houston, is seeking consent of Vietnamese officials to acquire a 25% interest in a PSC with Petrovietnam for exploration rights on the 1 million acre Block 22 in the South China Sea, about 175 miles off Vietnam. That's where an international group of companies spudded its first wildcat Apr. 12 in 180 ft of water.

Seagull proposes to join the venture by paying more of the wildcat's drilling costs to casing point than required by the 25% interest or until its payments equal $2.8 million. Other PSC partners and their shares of interest if Seagull is successful are operator Cairn Energy plc 20% interest, KM Southeast Asia Ltd. unit of Kerr-McGee Corp. 35%, and Monument Resources (Overseas) Ltd. unit of Monument Oil & Gas plc 22%.

Meantime, Crestone Energy Corp., Denver, is proceeding with a seismic survey of its Chinese acreage near a disputed boundary with Viet Nam.

MOBIL GROUP PLANS

Mobil previously held exploration acreage off Viet Nam before the end of the Vietnamese war in 1975.

The Mobil group PSC covers the Blue Dragon prospect on Block 05-lb, which Mobil identified along with the Big Bear (Dai Hung) prospect in March 1975.

The structure lies about 30 km southwest of Dai Hung field (see map, OGJ, June 15, 1992, p. 28).

Dai Hung is scheduled to see development drilling begin this year by a group led by BHP Petroleum Pty. Ltd. (OGJ, Feb. 21, p. 32).

Mobil in 1974 found White Tiger (Bach Ho) oil field off Viet Nam, which is currently operated by Vietsovpetro, a joint venture of Petrovietnam and a Russian successor to a former Soviet Union company. White Tiger is Viet Nam's sole source of commercial hydrocarbon production.

Mobil withdrew from operations in Viet Nam in April 1975, and a subsequent U.S. trade embargo aimed at Viet Nam has prevented any U.S. company from operating there until the ban was lifted this year (OGJ, Feb. 14, p. 42).

Mobil's group, MJC Petroleum Co. Ltd., in October 1993 bid to acquire the PSC for Block 05-lb, 175 miles southeast of the Mekong Delta. The following December, Hanoi awarded the group a 72.5% interest in the block along with Petrovietnam 15% and Russian company Zarubezhneft 12.5%. MJC interests are Mobil 50%, Japan Petroleum Exploration Co. Ltd. 25%, Indonesia Petroleum Ltd. 15%, and Nissho Iwai Corp. 10%.

No drilling plans or expected capital outlays have been disclosed for the project.

CRESTONE WORK

Crestone commenced a 1,200 line km seismic survey on its Wan'An Bei WAB-21 contract area in the South China Sea "with full support and protection from China."

The project is a touchy one politically because China's award of the acreage to Crestone almost 2 years ago sparked a war of words with Viet Nam over the territorial claims (see map, OGJ, July 13, 1992, p. 20).

Hanoi demanded that Beijing rescind the contract with Crestone, and both sides since have resorted to saber rattling at various times over the proposed drilling there. Crestone Chairman Randall Thompson visited Hanoi earlier this year at Petrovietnam's invitation to discuss the dispute and promote a joint development accord by the two nations, which Hanoi reportedly rejected (OGJ, Nov. 29, 1993, Newsletter).

The tiff is part of a larger dispute China and Viet Nam have over territorial claims around the Spratly and Paracel islands in the South China Sea. The two nations have in the past engaged in military action over ownership of the islands, believed to have world class potential for hydrocarbon discoveries. The two, along with Brunei, Malaysia, Philippines, and Taiwan, lay claim to overlapping boundaries of the Spratlys. China and Viet Nam dispute territorial claims in the Paracels.

The WAB-21 contract area covers 25,155 sq km, which Crestone said is the biggest petroleum contract awarded by China and the biggest contract area in Southeast Asia. A number of world class discoveries have been made in the vicinity off Viet Nam, Indonesia, and Malaysia.

The seismic program will be conducted in partnership with South China Sea Institute of Oceanology, Academia Sinica. It is intended to better define large structural leads mapped from earlier data.

Crestone will assume all exploration costs and risks, with an optional wildcat expected to spud soon.