Apache, PetroChina to proceed with Zhao Dong field development

Apache Corp., Houston, and PetroChina Co. Ltd. reported they have agreed to proceed with development of portions of the 49,000-acre Zhao Dong block in Bohai Bay, China. The agreement resolves issues that have delayed the project. It also calls for PetroChina and the China National Petroleum Corp. to quickly obtain final government approval of the phased development plan.

Jul 3rd, 2000


Apache Corp., Houston, and PetroChina Co. Ltd. reported they have agreed to proceed with development of portions of the 49,000-acre Zhao Dong block in Bohai Bay, China. The agreement resolves issues that have delayed the project. It also calls for PetroChina and the China National Petroleum Corp. to quickly obtain final government approval of the phased development plan. Upon approval, operator Apache will proceed with construction of production facilities and development drilling on the shallow-water block.

Apache agreed to drill one exploratory well on prospective acreage north of the development plan area in fulfillment of its minimum exploration work commitment, the company said. If a discovery is made on this acreage, Apache will have an opportunity to participate in appraisal drilling and ultimate development.

The agreement also calls for unitization of acreage in the C-4 area, where Apache made China's largest-flowing oil discovery in 1997. That discovery, the C-4 well, tested 15,359 b/d of oil. (Oil & Gas Journal, Nov. 30, 1998)

Apache and PetroChina agreed to exchange financing assurances to cover development costs for the project.

"Negotiators representing Apache and PetroChina were able to work together constructively and achieve an outcome intended to be beneficial to all parties,'' says Apache Chairman and CEO Raymond Plank. "This agreement represents a significant step in building a transparent relationship with our Chinese counterparts. The important thing now is to move ahead with development as quickly as possible.''

Subject to certain approvals, including bankruptcy court approval on behalf of XCL-China Ltd. the agreement resolves the issues raised in Apache's lawsuit against PetroChina and other Chinese parties, the company reported.

In 1999, Apache Corp. filed involuntary bankruptcy proceedings against XCL-China, an affiliate of XCL Ltd., Lafayette, La., its partner in the Zhao Dong project. Apache alleged, among other things, that XCL owed half the engineering and design costs incurred over the Zhao Dong project. In its turn, XCL claimed Apache had exceeded its spending authority on the project.

Recently, XCL was delisted from the OTC Bulletin Board because of failure to file its 1999 annual report and first quarter 2000 report.

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