Kerr-McGee Makes 8th Discovery in Bohai Bay Offshore China

Kerr-McGee continues its exploration success in Bohai Bay, China, announcing its eighth discovery, the CFD 14-5-1 well in block 09/18 where Kerr-McGee holds a 100% foreign contractor's interest. The well is located in 75 feet of water and was drilled to a total depth of 13,970 feet. It encountered 85 feet of net oil pay in the Eocene Shahejie sand section, with an initial wellsite API gravity of 26 degrees.

The Eocene Shahejie zone is a prolific oil producing section in several large onshore fields that rim the western part of Bohai Bay. The Shengli Complex, Dagang and Jidong fields contain an estimated 2.5 billion barrels of recoverable reserves from the Shahejie zone. Kerr-McGee's discovery, along with other Shahejie fields in the shallow water, extends the play type into Bohai Bay.

"The CFD 14-5-1 discovery expands our success in Bohai Bay, a prolific basin where we operate four blocks that include more than 1.7 million acres," said Dave Hager, senior vice president of oil and gas exploration and production.

Kerr-McGee will submit an appraisal plan for the CFD 14-5 area to the government, and the first appraisal well is expected to spud prior to the end of 2004. Currently, the company is preparing to spud the CFD 11-1N-1 exploration prospect on block 04/36.

"Appraisal drilling is required to confirm the size and commerciality of this discovery, but we are encouraged that several nearby fields, both onshore and offshore, have large reserves from this stratigraphic interval," said Hager. "The Bohai Bay area continues to add value as a core exploration and production play for Kerr-McGee. Two fields are already on production and development planning also is under way for five of our Bohai Bay discoveries, which are candidates for tie-back to our initial development."

The company's most recent discovery is located approximately 20 miles southwest of Kerr-McGee's CFD 11-1 and CFD 11-2 development, which began production in July. Production is on line from 15 wells with current gross rates of more than 30,000 barrels of oil per day (b/d). Additional development drilling is ongoing and the company expects to increase gross production rates to approximately 40,000 to 45,000 b/d by mid-2005.

Kerr-McGee operates four exploration licenses in western Bohai Bay, with foreign contractor's interests ranging from 50% to 100%. Development planning is under way for the CFD 11-3, CFD 11-5 and CFD 11-6 fields on block 04/36, each operated by Kerr-McGee with an 82% foreign contractor's interest. In addition, development planning is ongoing for the CFD 12-1 and CFD 12-1S fields on the adjacent 05/36 block, which are operated by Kerr-McGee with a 50% foreign contractor's interest. Upon approval of development, China National Offshore Oil Corp. (CNOOC) has the right to back in for a 51% interest.