CNOOC to Undertake Deepwater Exploration on its Own

Dow Jones Newswires

HONG KONG , May 25, 2007 (Dow Jones Newswires)

China National Offshore Oil Corp., or CNOOC, Friday said it plans go into deepwater exploration to look for petroleum reserves in offshore China, using its own deepwater drilling rig.

The "experiment" will be carried out in October, Chairman Fu Chengyu told reporters after the annual general meeting of CNOOC's listed unit, CNOOC Ltd. (0883.HK)

This will be CNOOC's first independent foray into deepwater exploration. The third largest Chinese oil firm in terms of assets has so far signed 10 deepwater contracts with foreign companies, such as Canada's Husky Energy Inc., (HSE.T), to use their expertise in drilling in depths where it lacks the necessary technology.

Fu said CNOOC is upgrading an existing 300-meter rig so that it will be able to drill 1,000-1,500 meters under the sea.

"Deepwater exploration is one of our very important priorities, but there aren't many deepwater rigs available for sale in the market, therefore we have to do it using what we have," Fu said.

"If we succeed (in October), some big-scale explorations could be kicked off two years earlier than originally planned," he added.

CNOOC is currently restricted to pumping oil and gas offshore at no deeper than 350 meters because of its limited technology.

However, China's insatiable demand for energy has prompted the oil company to partner with experienced deepwater explorers to drill further and deeper into the sea for oil and gas.

Fu also said CNOOC Ltd. will be among the first batch of red chips, Hong Kong-registered and Hong Kong-listed mainland companies, to list on the mainland's stock markets.

"I understand that the technicalities (for red chips to list in the mainland) will be solved by the year-end. I am confident we can list (in the mainland) as soon as we are allowed to," he said, adding that CNOOC Ltd. plans to sell new shares and raise money from the planned mainland listing.

He also said that CNOOC Group is still in talks to import liquefied natural gas from Iran, but that no agreement has yet been reached.

He declined to comment on a lawsuit filed by a partner in one of its Indonesian projects.

The partner is claiming part of the Chinese company's 16.96% stake in the $5 billion Tangguh liquefied natural gas project in Indonesia.

The Tangguh project is one of CNOOC's biggest overseas investments to date, and is crucial to the supply of LNG to the Fujian receiving terminal that it is building in southern China.

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