CNOOC signs first deepwater exploration agreement

China National Offshore Oil Corp. (CNOOC) has signed a production-sharing agreement with Husky Oil China Ltd., a unit of Husky Energy Inc., Calgary, to explore for oil on deepwater Block 40/30 in the Pearl River Mouth basin of the South China Sea.

By OGJ editors
HOUSTON, Dec. 6 -- China National Offshore Oil Corp. (CNOOC) has signed a production-sharing agreement with Husky Oil China Ltd., a unit of Husky Energy Inc., Calgary, to explore for oil on deepwater Block 40/30 in the Pearl River Mouth basin of the South China Sea. The block is about 30 km southwest of the gas-bearing PY30-1 structure.

The contract, which follows the recent announcement of two production-sharing contracts with Husky on Blocks 23/15 and 23/20 in the Beibu Gulf basin of the South China Sea, is the first deepwater exploration PSA signed between CNOOC and foreign petroleum companies since it announced the tendering of deepwater areas in September (OGJ Online, Sept. 25, 2002). Other international companies are studying the geological data of the 12 deepwater blocks CNOOC offered.

Husky's Block 40/30, which lies about 100 km southeast of Hainan Island in the Pearl River Mouth basin, covers an area of 6,704 sq km in water 600-1,500 m deep.

Under terms of the PSA, the exploration period will be divided into three phases, with Husky required to drill one wildcat at least 1,600 m deep in Phase I.

Husky has agreed to pay 100% of the exploration expenditures, estimated at a minimum of $10 million, and CNOOC retains the right to farm in as much as 51% working interest in any commercial discoveries on the block.

"We believe these new deepwater provinces will open new opportunities to us and our foreign partners," Said Ru Ke, executive vice-president of CNOOC's exploration and production unit CNOOC Ltd., which made the announcement of the award. "We are confident more interests will follow Husky's lead," he added.

In other activities in the Pearl River Mouth basin, Husky Oil China recently produced first oil for CNOOC Ltd. from Wenchang field about 140 km east of Hainan Island and 400 km southwest of Hong Kong. (OGJ Online, July 25, 2002). Husky holds 40% and CNOOC Ltd. 60% of those fields.

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