Gulf Times (Qatar): China may drill field that Shell rejected: "Shell and Chevron each have a 45% stake in a $4.5bn project to tap natural gas from 3,000 meters below sea level in the same field off the Philippine island of Palawan.": Published: Sunday, 11 December, 2005, 08:40 AM Doha Time
SINGAPORE: China National Offshore Oil Corp, the nation's third-biggest oil producer, may drill a field off the Philippine coast that Royal Dutch Shell Plc and Chevron Corp abandoned as unprofitable.
“We are studying” the Malampaya reserve, China National Offshore vice-president Zhou Shouwei said recently at the Ascope oil and gas conference in Manila. Shell and Chevron said in September tapping the oil would cost as much as $900mn, making the investment uneconomic.
Fu Chengyu, president of the Chinese state-controlled company, is looking for overseas projects after a failed attempt to buy US-based Unocal Corp for $18.5bn. Participation in Malampaya, which has enough oil to meet China's demand for four days, may help win Philippine support to explore in disputed waters near the Spratly Islands that may hold larger reserves, analysts and investors said.
“Either you compete with countries for energy resources or you cooperate,” said Winson Fong, who helps manage $1.95bn for SG Asset Management in Singapore. “China needs to secure long-term, stable supplies of oil from different areas.
By investing it also helps build a bilateral relationship.'' Government-owned China National Offshore has 70% of Hong Kong-listed Cnooc's shares. Fu, chairman of the subsidiary, needs overseas fields to complete his mission to double oil production over the next five years. Unocal, a takeover target abandoned in August by Cnooc because of political opposition in the US, would have achieved that objective in one transaction.
China's oil demand has more than doubled in a decade, increasing the portion met by imports from zero to about 41%. Fuel consumption in the world's fastest-growing major economy is rising as the auto fleet expands, while increased factory output boosts demand for petrochemicals. The Malampaya field may have 25mn barrels of oil, Shell and Chevron said in a letter received by the Philippine Energy Department on September 30.
China National Offshore's interest in tapping the deposit was reported earlier this month by the Philippine Daily Inquirer and the Manila Standard, citing Vice- President Zhu Weilin.
The Chinese company has studied the data on oil reserves at Malampaya, Eduardo Manalac, chief executive of the Philippine National Oil Company said today. ``The government is hell-bent on trying to exploit this reserve,'' he said.
Shell and Chevron each have a 45% stake in a $4.5bn project to tap natural gas from 3,000 meters below sea level in the same field off the Philippine island of Palawan. The gas supplies power stations through a 504-kilometer pipeline. Oil and gas deposits are often found in the same location. China National Offshore and Philippine National Oil Co also agreed during Chinese President Hu Jintao's visit to the Philippines in May to look for oil and gas off Calamian Island near Malampaya, according to a statement from the Philippines' foreign ministry.
In the South China Sea, China National Offshore, Vietnam Oil & Gas Corp, known as PetroVietnam, and Philippine National Oil completed the first phase of a joint study of oil resources in 144,000 square kilometers (54,000 square miles), the Chinese government said in a November 17 statement. — Bloomberg
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