Multi-billion-dollar Oil and Gas Deals Clinched

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Last updated at: (Beijing Time) Wednesday, August 20, 2003

Multi-billion-dollar Oil and Gas Deals Clinched

Leading domestic and foreign oil explorers have clinched multi-billion-dollar deals to accelerate the development of oil and gas projects in the resource-rich East China Sea. The five prospecting and exploitation contracts were signed Tuesday between the China National Off-shore Oil Corp (CNOOC), the China National Petrochemical Corp, the Shell Group and the Union Oil Co of California.

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Shell Signs Multi-billion-dollor Oil, Gas Contract in China

The Royal Dutch/Shell Group signed five contracts with two major Chinese oil companies in Beijing Tuesday to participate in the largest off-shore oil and natural gas project granted by China to foreign companies in recent years.

Walter van de Vijver, a managing director of the Royal Dutch/Shell Group, said here Tuesday that the contracts were a milestone ein Shell's cooperation with China.

According to the contracts, Shell will join the China National Offshore Oil Corp. (CNOOC) and China National Petrochemical Corp. (Sinopec), two of the largest oil companies in China, to explore and extract oil and natural gas in a 22,000-sq-km area on the East China Sea.

Another participant in the contracts is the US-based Union Oil Co. of California (UNOCAL). CNOOC and Sinopec will each contribute30 percent of the total investment under the contracts, while Shell and UNOCAL equally share the remaining 40 percent. The four parties will divide up revenues in the same ratio.

Vijver said that at the initial stage of the contracts, Shell would invest less than one billion US dollars in tapping off-shore oil and natural gas in the East Sea. He said as the contracts and other projects in China mature, Shell is likely to raise the stake to five billion US dollars in the next five years.

The contracts, including two exploration contracts and three extraction contracts, have a term of 30 years. CNOOC will be entrusted as the sole agent to operate the exploration, extraction, production, transportation and marketing of the oil and natural gas from the project.

The site of the project is 500 kilometers offshore to the southeast of Shanghai. One of the natural gas fields found in the area has a total reserve of 65.2 billion cubic meters. A deposit of 12.7 million tons of oil was also discovered in the same area.

The natural gas field, known as Chunxiao, is expected to start production in the first half of 2005, with an annual output of 2.5billion cubic meters. It then will be able to pipe out a stable supply for 13 years.

The contracts were part of the off-shore oil and gas program that China launched to diversify energy supply for the prosperous Yangtze River Delta in east China. Natural gas from the East Sea off-shore oil fields will be used to supplement supply transmitted from western part of the country and as a backup resource for Shanghai, the biggest city in China.

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