China National Offshore Oil Corporation (CNOOC), China's largest offshore oil producer, signed two production sharing contracts (PSC) with Britain-based British Gas for two deepwater oil blocks in the western area of the South China Sea, said sources with the company on Wednesday.
A geophysical survey agreement on another deepwater block in the eastern part of the South China Sea has also been signed by the two parties.
Both of the PSC blocks, 64/11 and 53/16, are located in the Qiong Dong Nan Basin, and block 41/06 is in the Pearl River Mouth Basin.
The three blocks are on the list of 12 blocks CNOOC offered for cooperation in 2002, covering a total area of approximately 25,800 square kilometers and a water depth ranging from 180 to 2,100 meters.
This is the first time CNOOC and British Gas have cooperated in offshore China. Before that, four deepwater contracts have already been signed between CNOOC and other foreign partners.
Under the terms of the contracts, British Gas will conduct 2D and 3D seismic data collection in Block 64/11 and 53/16, and drill one exploration well during the first phase of the exploration period on each block.
British Gas will retain 100 percent interests during the exploration phase and CNOOC has the right to participate in up to 51 percent working interest in any commercial discoveries in the blocks.
According to the agreement on Block 41/06, British Gas is committed to acquire 2D seismic data and conduct processing and interpretation of current data.
Fu Chengyu, President of CNOOC, said that the company expects British Gas' decision to join CNOOC in exploring the deep water potential offshore China to benefit both companies.
A deepwater area of over 300 meters deep is a prime location for large oil and gas discoveries. As CNOOC has entered another wave of cooperation with foreign partners in offshore China, any great discovery will raise China's oil and gas reserves to a new level, said experts.