China-focused Primeline Energy Holdings Inc. signed a Letter of Intent (LOI), valued at $20 million, Tuesday with China Oilfield Services Ltd. (COSL) for the latter to undertake drilling operations in an upcoming exploration program in Block 33/07 in the East China Sea, the firm said Thursday.
Under the LOI, which is subject to a final contract, COSL will commence drilling of two wells in August. The first well will be LS23-1-1, while the second will be selected from two prospects following an evaluation of the results of the first well. The total drilling costs exclude costs for any test if oil and gas are discovered.
The exploration drilling program marks the beginning of a rolling development strategy by Primeline now that the production infrastructure hub and access to gas market has been established and LS36-1 field has been in production. Primeline hopes to find more hydrocarbons to capitalize on the infrastructure hub and the access to market, which enable future discovery in the area to be quickly and cost effectively developed.
"The rig market has proved favorable with good availability of suitable rigs and competitive prices. With the completion of the 3D seismic data interpretation, the selection of drilling locations was completed in the past few weeks and locations have been agreed and approved by the joint management committee established by CNOOC and Primeline under the petroleum contract for Block 33/07," Primeline said in the press release.
China National Offshore Oil Corp. (CNOOC) has the option of taking a 51 percent stake in Block 33/07 in the event of a commercial development.
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