ConocoPhillips OKs Sale of China Gas Field to EOG

Dow Jones Newswires

BEIJING, Dec 28, 2007 (Dow Jones Newswires)

U.S. oil company ConocoPhillips (COP) has agreed to sell its Chuan Zhong natural gas block in China's Sichuan province to Houston-based EOG Resources Inc. (EOG), two people familiar with the deal said Friday.

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 a day in 2006.

The deal marks EOG Resources' return to China's energy sector and will see it resume ownership of the Chuan Zhong gas block, which it sold some years earlier to Burlington Resources. Burlington was acquired by ConocoPhillips in March last year in a $35.6 billion deal.

EOG Resources will hold a 100% working interest in the block and be the co-venturer of China National Petroleum Corp., China's largest oil company by output and the parent company of PetroChina Co. (PTR). The value of the deal wasn't disclosed.

Officials at the China unit of ConocoPhillips didn't return calls seeking comment. EOG also couldn't be reached for comment.

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.

But 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) this month signed a production sharing contract with CNPC for the Chuandongbei gas field in Sichuan, which includes the high-sulfur Luojiazhai gas field, where 243 people were killed in a blowout in 2003.

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, said ConocoPhillips.

ConocoPhillips' share of natural gas output from the Chuan Zhong block totaled 6.93 million cubic feet a day last year. In addition, the block produced small amounts of condensate.

Selling its only producing onshore natural gas asset frees ConocoPhillips to concentrate on the PL 19-3 oil field in Bohai Bay, which is expected to produce around 154,700 barrels of oil a day in its second phase.

BEIJING, Dec 28, 2007 (Dow Jones Newswires)