Sinopec to Drill First Well in Nigeria-Sao Tome JDZ

Dow Jones Newswires

SYDNEY (Dow Jones Newswires), Jun. 19, 2009

China Petrochemical Corp. will drill its first exploration well in the Nigeria-Sao Tome and Principe Joint Development Zone next month after a lengthy delay caused by a shortage of deepwater rigs, two officials familiar with the matter said Friday.

Efforts to speed up exploration in Block 2 come as state-owned Sinopec seeks to clinch a takeover of Addax Petroleum Ltd., one of its partners in the joint development zone, or JDZ.

The TransOcean SEDCO-702 deepwater rig is due to arrive at Block 2 around July 1 and drilling will start immediately afterwards, said an official with the JDZ.

Sinopec secured the production and sharing contract on the block in 2006, but hasn't been able to drill up to now due to a shortage of deepwater rigs, a Sinopec official and the JDZ official said.

They declined to speculate on the Sinopec-operated block's potential reserves, but industry reports point to a pre-drill resource estimate of about 275 million barrels.

China, the world's second largest oil consumer, is keen to find more oil and gas reserves, especially when asset valuations are low due to the sharp decline in oil prices since July last year. Light, sweet crude on the New York Mercantile Exchange is currently trading more than 50% below its peak above $147 a barrel.

Much of its overseas activity has been focused on Africa, with China offering soft loans and aid to governments on the continent in exchange for its state companies having access to resources.

Sinopec executives traveled to London this week to meet with Addax Petroleum to discuss a potential takeover bid, two people familiar with the matter said.

London and Toronto-listed Addax Petroleum has a 14.33% working interest in Block 2, along with stakes in three other blocks in the JDZ.

It is the operator of Block 4 via a 45.5% stake and also holds interests of 40% and 15% in Block 1 and Block 3, respectively, according to the company's 2008 annual report.

Sinopec Group is the parent of Hong Kong-listed China Petroleum & Chemical Corp. It has been aggressively pursuing oil assets overseas to reduce its reliance on refining for revenues and profits.

Sinopec is particularly interested in assets in South America and Africa, company chairman Su Shulin said in May.

Equity oil and gas output from overseas fields, mostly located in Russia, Angola, Syria, Australia and Kazakhstan, totaled 9 million metric tons last year, up from 6.87 million tons in 2007, Su said in March.  

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