CNOOC Goes Solo in Deepwater Exploration, Opens New Frontier for China

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China's first ever deepwater hydrocarbon discovery is significant not only for the domestic upstream industry, but also on countries in the region.

China finally realized its goal of finding petroleum reserves in deepwater acreage when state-owned China National Offshore Corp. (CNOOC) successfully drilled the Lingshui 17-2-1 exploration well at the Lingshui 17-2 gas field in the South China Sea, located 93 miles (150 kilometers) south of Hainan Island in the Qiongdongnan Basin.

The Lingshui gas find has generated excitement in China’s upstream hydrocarbon sector – particularly for CNOOC whose portfolio of domestic offshore oil and gas fields are relatively mature – as deepwater prospects could emerge as the next frontier for the company.

Even so, the optimism surrounding China’s first deepwater hydrocarbon discovery has been tempered by concerns that an extension of Chinese exploration to the disputed waters of the South China Sea could trigger political, diplomatic and potentially military complications with neighboring countries.

China Finds Success in Deepwater, Finally

CNOOC announced the Lingshui discovery in mid-September by Hai Yang Shi You 981 or HYSY 981 (UDW semisub). The rig – China’s first locally built deepwater semisub costing $975 million to construct – was at the center of a diplomatic spat between China and Vietnam in May when CNOOC conducted exploration drilling near Paracel Island, 120 nautical miles from Vietnam’s coast. Vietnam is contesting China’s sovereignty over the Paracel Island, which Beijing seized from South Vietnamese troops in 1974.

The Lingshui well broke new ground for China as this was the first time a local petroleum firm succeeded in drilling a deepwater exploration well – without foreign assistance – at depths of 4,921 feet (1,500 meters).


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