CNOOC Eyes First Foray Into Offshore Arctic Oil Drilling

CNOOC Eyes First Foray Into Offshore Arctic Oil Drilling

LONDON - China National Offshore Oil Corp., or CNOOC, is partnering with Iceland's Eykon Energy in an application for a license to explore and produce oil and gas in Arctic waters offshore Iceland, the country's hydrocarbon licensing manager told Dow Jones Newswires Wednesday.

If the application is successful and a license is awarded, it would mark the Chinese company's first foray into offshore Arctic oil drilling, a new area the industry's biggest players are scrambling to enter in efforts to replenish reserves, but which has become increasingly controversial.

While believed to hold vast petroleum reserves, green groups are opposed to drilling in the pristine Arctic environment and investors are concerned about the risks and potential costs to a company in the event of an accident.

CNOOC said in an emailed statement that the government of Iceland and Eykon Energy have invited CNOOC to take part in its offshore oil and gas exploration activity and the project is currently under negotiation.

Chinese oil companies have long been seeking an offshore Arctic oil deal as part of Beijing's efforts to secure supplies for the energy hungry nation. Earlier this year, CNOOC and other Chinese oil companies held talks with Igor Sechin, the head of Russia's state-controlled OAO Rosneft, during his visit to China about potential offshore projects in the Russian Arctic.

In April, Iceland and China signed the first free trade pact between Beijing and a European country soon after a visit to Iceland by former premier Wen Jiabao. In May, following intensive lobbying, China became an observer on the Arctic Council, a body whose members hope to shape growing prospects for resource development and trade, underscoring the country's interest in the Arctic region.

CNOOC's participation in the project would also mark the first entry of a major oil company into Iceland's nascent oil sector. Earlier this year, it awarded two licenses from its first successful round for acreage in the Dreki area, northeast of Iceland and neighboring coastal waters in oil producing Norway.


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Copyright (c) 2012 Dow Jones & Company, Inc.

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