Sino-Norwegian Rig Contract Overcomes Nobel Rift

BEIJING (Dow Jones)

China Oilfield Services Ltd. (2883.HK), a unit of one of China's largest oil companies, has signed a long-term oil drilling contract with Norway's Statoil ASA (STL.OS), demonstrating that Beijing's fury over the award of the Nobel Peace Prize to jailed dissident Liu Xiaobo isn't an obstacle to major commercial deals.

Details of the contract were posted on the COSL website on Dec. 10, the same day the Nobel prize was awarded. Statoil also announced the award, in a little-noticed release on its website, the day before the Oslo ceremony.

Under the five-year deal, China's most advanced offshore oil rig will be deployed in the stormy waters of Norway's continental shelf by Statoil, starting in the middle of 2011.

The value of the deal hasn't been disclosed, but it will run into many hundreds of millions of dollars; in March, Statoil chartered two rigs for drilling in the same area--one for three years at $421 million and another for four years at $394 million.

When the announcement that the prize would go to Liu was made Oct. 8, China foreign ministry spokesman Ma Zhaoxu said the award would "damage Sino-Norwegian relations."

That remark was followed by the cancellation by Beijing of a visit by the Norwegian fisheries minister, who had been due in China for talks aimed at boosting Norwegian salmon sales to China and Hong Kong by more than 60% by 2012. China is Norway's eighth-largest salmon market, accounting for 4% of those exports.

Then on Nov. 30, Norwegian officials said China had postponed negotiations due for late this year aimed at agreeing to a free-trade accord.

COSL is the oil-field services and rig-construction unit of China National Offshore Oil Corp., the country's largest offshore oil and gas company. It said the Statoil contact had been awarded to its wholly owned subsidiary COSL Drilling Europe AS.

COSL CEO and President Li Yong thanked Statoil for "their trust in us," on the COSL website.

The semi-submersible COSL Pioneer drilling rig was completed by the company at the Yantai CIMC Raffles shipyard in Shandong province in October. It met the most stringent requirements needed to operate in the rugged North Sea environment, COSL said.

The platform, with an overall length of 104.5 meters and width of 65 meters, is able to operate in water depths of 70-750 meters and drill to a depth of 7,500 meters.

"We are pleased with the fact that this contract secures the necessary future capacity in the rig market. In 2011, the semi-submersible COSL Pioneer will contribute to maintaining a sustainable exploration activity on the Norwegian continental shelf," Statoil senior vice president for exploration and production, Tom Dreyer, said in a statement on Statoil's website.

In the first 10 months of 2010, Norwegian imports from China, excluding ships and oil platforms were worth NOK30.5 billion, while exports to China were worth just over one-third of this, according to data from Statistics Norway.

Chinese companies have done a lot of business with Statoil this year, including fourth-ranked oil group Sinochem Group, which in May bought a 40% stake in the Peregrino field offshore Brazil from Statoil for $3.07 billion, and followed this up in June by signing a broad cooperation pact with the company.

Statoil is also cooperating with China Petroleum & Chemical Corp., or Sinopec, in a technical study for deep-water exploration in an area of the South China Sea.

Copyright (c) 2010 Dow Jones & Company, Inc.

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