BEIJING Sep 27, 2007 (Dow Jones Newswires)
U.S. oil major ConocoPhillips (COP) is offering its Chuan Zhong block in China's Sichuan province to potential buyers in a rare sale of a Chinese onshore oil and natural gas asset by a foreign company.
The Chuan Zhong block, which covers an area of 295,000 acres in southwestern China and includes the Ba Jiao Chang gas field, produced an average of 10.3 million cubic feet of natural gas per day in 2006.
ConocoPhillips holds a 100% working interest in the block through an agreement with China National Petroleum Corp., China's largest oil company by output and the parent company of PetroChina Co. (PTR).
"We are in the process of marketing the asset, but have not yet concluded a sale," Charlie Rowton, Houston-based spokesman for ConocoPhillips, said in response to an inquiry from Dow Jones Newswires.
Rowton declined to comment further.
China's onshore oil and natural gas sector remains largely closed to foreign companies, with production tightly controlled by PetroChina and its main domestic rival, China Petroleum & Chemical Corp. (SNP), known as Sinopec.
Only a handful of foreign companies have secured a foothold so far, with Royal Dutch Shell (RDSA) and Total S.A. (TOT) drilling in the Ordos Basin in northern China's Inner Mongolia region.
However, China's rapidly growing energy needs and a lack of technology for tackling complex oil and gas fields have created opportunities for foreign companies.
Chevron Corp. (CVX) last month won the right to help develop PetroChina's high-sulfur Luojiazhai gas field in Sichuan.
ConocoPhillips acquired the Chuan Zhong block through its $35.6 billion takeover of Burlington Resources in March 2006, a deal which also gave it a 24.5% stake in the Panyu oil fields in block 15/34 in the South China Sea.
Pilot production began in the Chuan Zhong block in 1999 and government approval of the field development plan was granted in early 2004, according to information on ConocoPhillips' Web site.
By the end of last year, a total of 19 wells had been drilled in the Chuan Zhong block and development was ongoing, ConocoPhillips said.
ConocoPhillips' share of natural gas output from the Chuan Zhong block totaled 6.93 million cubic feet per day last year. In addition, the block produced small amounts of condensate.
Sichuan has yielded several major finds in recent years, including Sinopec's Puguang gas field with estimated proven reserves of about 356 billion cubic meters, putting the province on course to become China's key onshore natural gas-producing hub.
Earlier this year, PetroChina President Jiang Jiemin said his company had discovered a gas field at Longgang in Sichuan that could potentially be China's largest. Investors are currently waiting for PetroChina to announce formally the size of reserves at Longgang.
By disposing of the Chuan Zhong block, ConocoPhillips will be able to focus more resources on the offshore Peng Lai field in northern China's Bohai Bay, which is China's largest oil discovery by a foreign company to date.
The PL 19-3 field, discovered in May 1999, produced 22,700 barrels of oil per day on average last year, but this is set to jump when a second phase of production comes on stream in 2009.
ConocoPhillips, which is operator of the PL 19-3 field, expects the second phase to produce around 154,700 barrels of oil a day. It has a 49% stake in the field, with Cnooc Ltd. (CEO), China's largest offshore oil producer, holding the remainder.
In addition to the Chuan Zhong block, Peng Lai oil field and Panyu assets, ConocoPhillips also operates the 71,000 barrels a day Xijiang oil fields in the South China Sea. The Xijiang fields were its first offshore fields to go into production.
Copyright (c) 2007 Dow Jones & Company, Inc.
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