Investment

CNOOC amends output deals with Chevron, BP

By Wan Zhihong (China Daily)
Updated: 2010-09-09 07:58

A security guard stands outside the China National Offshore Oil Corp headquarters in Beijing. Adam Dean / Bloomberg

BEIJING - China National Offshore Oil Corp (CNOOC), the country's largest offshore oil and gas producer, said on Tuesday it signed amended production-sharing agreements with Chevron Corp and BP Plc for three deepwater blocks in the South China Sea, after US oil company Devon Energy Corp withdrew from the projects.

Chevron acquired a 59.18 percent interest in block 42/05 and a full interest in blocks 64/18 and 53/30 from Devon in the exploration phase.

BP acquired Devon's remaining interest in block 42/05, said a CNOOC statement.

During the exploration period, Chevron will act as the operator in the three blocks. CNOOC has the right to a 51 percent interest in the event of any commercial discovery in the blocks.

"We welcome Chevron and BP to become our new partners in these blocks and look forward to the joint exploration of this great deepwater potential in the South China Sea," said Zhu Weilin, executive vice-president of the company and general manager of its exploration department.

Analysts said that the deal is in line with China's continuous efforts to make more deepwater oil discoveries to meet its increasing demand,

"Foreign companies still have advanced deepwater technologies. Cooperation with them is beneficial for CNOOC," said Qiu Xiaofeng, an analyst with China Merchants Securities.

According to CNOOC, the company had invested more than 15 billion yuan ($2.19 billion) in building deepwater drilling vessels, and deepwater lifting and pipe-laying barges, as well as deepwater geographical survey vessels.

Once operational in 2011, such investment would significantly enhance China's capacity to explore and develop deepwater petroleum and gas resources, according to the company.

Oceans are estimated to hold about one-third of the world's petroleum and natural gas resources and they are likely to replace terrestrial and inshore regions as the world's major depositories of oil and gas resources, said the company.

CNOOC said earlier it is doing its best to ensure that its production facilities at sea do not repeat the mistakes of the oil spill in the Gulf of Mexico.

The company has "ordered checks on every offshore oil and gas project to ensure safety", Zhou Shouwei, vice-president of CNOOC, said earlier.

Among improvements to technological capabilities for safety enhancement, Cnooc has started upgrading the blowout preventer (BOP) system of its 3,000-m deepwater oil-drilling rig which is being built in Shanghai, Zhou said.

After modification, the BOP is expected to shut down automatically when there is an accident.

China Daily