Kerr-McGee Acquires Deepwater Acreage Offshore China

South China Sea Block 43/11
(Click to Enlarge)
Kerr-McGee China Petroleum Ltd., a wholly owned affiliate of Kerr-McGee Corp., has signed a production sharing contract with China National Offshore Oil Corp. (CNOOC) for block 43/11, which covers 2.4 million undeveloped acres (9,729 square kilometers) in the South China Sea. Under the contract, Kerr-McGee holds a 100% foreign contractor's interest in the first phase of the exploration period. CNOOC has the right to participate with up to a 51% interest if Kerr- McGee enters into the development phase.

Block 43/11 is located about 220 miles (350 kilometers) southeast of Hong Kong, in water depths ranging from 5,000 feet to more than 10,000 feet (1,500 meters to 3,000 meters).

"This contract allows us to leverage our deepwater expertise and build on our long-standing relationship with CNOOC, as we explore the proven hydrocarbon basins of the deepwater South China Sea," said Dave Hager, Kerr- McGee senior vice president responsible for oil and gas exploration and production. "As the largest U.S.-based independent producer in the deepwater Gulf of Mexico, we have developed expertise, technology and cost advantages that we can utilize as we explore for new energy resources in this area."

"This is our first deepwater exploration contract with CNOOC, and it more than doubles our acreage in China to 4.1 million acres," said Michael Verm, vice president of Kerr-McGee's China operations. "Our success in China is marked by eight discoveries in Bohai Bay and the development of two fields that came on line in July 2004, within budget and five months ahead of schedule. These achievements were the result of teamwork, commitment and sharing of expertise, and we look forward to building on our China success in our new endeavors with CNOOC."

In Bohai Bay, production from Kerr-McGee-operated CFD 11-1 and CFD 11-2 fields on block 04/36 currently ranges from 40,000 to 45,000 barrels of oil per day. The two fields were developed using platform wells producing to a floating production, storage and offloading vessel. Development of the Kerr- McGee-operated CFD 11-3 and CFD 11-5 fields on block 04/36 is in the final approval stages for development. Kerr-McGee holds an 82% predevelopment foreign contractor's interest in these fields.

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