Drilling in gas block to start in H2

China National Offshore Oil Corp plans to begin drilling for natural gas in the 43/11 deepwater block in the South China Sea in the second half of the year.

That's what Wang Yilin, company chairman, said on the sidelines at the National People's Congress on Thursday, without giving further details.

CNOOC plans to be the operator of the deepwater block, marking the first time it has performed such a task. The company will have a 55.5 percent interest in the project when it moves into its development and production phase, while BP PLC is to hold 20 percent and Anadarko Petroleum Corp is to hold 24.5 percent.

During the exploration, CNOOC is to hold a 9.18 percent working interest in the project, while BP is to have a 40.82 percent interest and Anadarko a 50 percent interest.

BP said it received the Ministry of Commerce's approval in February to participate in the project, more than a year after CNOOC and BP said they would work together to explore the block. That agreement came during Vice-Premier Li Keqiang's visit to Britain in January 2011.

The companies have conducted seismic tests in the deepwater block and are preparing to drill the first well.

CNOOC has set itself the ambitious target of extracting 50 million metric tons of oil equivalent from the block by 2020. Because of that production potential, the project is often described as being the "deepwater Daqing", the first large oilfield found in China.

The first big discovery of deepwater gas resources in China, which CNOOC was involved in, was made in 2006 by Husky Energy, which plans to start production in the block in 2014 and have a daily output of 14.2 million cubic meters in 2015.

Apart from BP, the United States-based ConocoPhillips Co and other foreign oil companies have also expressed interest in participating in Chinese deepwater projects, which will mainly be conducted in the South China Sea.

If Chinese oil companies want to gain more management and technological expertise, especially in deepwater exploration, they should act more often as operators on such projects, said Ru Ke, CNOOC former chief geologist and a member of the Chinese People's Political Consultative Conference National Committee.

But Wang said CNOOC will continue absorbing advanced technologies and working with foreign companies, some of which have greater capabilities than their Chinese counterparts.

Wang also said the company's deepwater rig, Hai Yang Shi You 981, which can operate at depths below 3,000 meters, is already being tested in the South China Sea and is expected to be put into use soon.

The rig is the biggest piece of equipment that has been used to help CNOOC undertake the difficult task of tapping deepwater resources.

Wang also said that seismic work is still being conducted on the company's first shale-gas block in Anhui province, which is being jointly explored with China Petrochemical Corp, or Sinopec Group, without furnishing a schedule.

Wang said CNOOC has yet to consider bringing foreign companies into the shale-gas project. "We will do the biggest work on our own," he said.