Singapore Corporate News - 7 Aug 2007

SPC clinches first oil/gas exploration deal in China

SINGAPORE Petroleum Company said yesterday it has gained a foothold in China's oil and gas market through its first exploration and production (E&P) project there.

The Singapore company has acquired 100 per cent of a 4,961 sq km offshore block in the Pearl River Mouth Basin, where it will search for oil and gas under a production sharing contract (PSC) with China National Offshore Oil Corporation CNOOC).

Block 26/18 is 150 km offshore, where SPC will conduct seismic surveys and exploration drilling in water 85-200 metres deep.

SPC did not say how much the rights cost. But it is understood the company is committed to spend a set amount on surveys and drilling.

If oil and/or gas is found in commercial quantity, state-owned CNOOC has the right to 'farm-in' or participate up to an interest of 51 per cent.

'We are very pleased to build an alliance with CNOOC for this foothold in China's large oil and gas market,' said SPC chief executive Koh Ban Heng.

'SPC has steadily grown its presence in the regional E&P sector since 2000. Gaining entry into China will allow us to tap this vast market and strengthen our E&P portfolio.'

SPC has so far been involved in E&P in Indonesia, Vietnam, Cambodia and Australia and expects oil to start flowing from its Indonesian Oyong field next month. Its sole producing field now is Kakap, off Indonesia, which is giving it 2,540 barrels of oil equivalent per day.

Sources said negotiations for the China block took six to nine months and SPC is looking at other blocks there.

Under the PSC agreement, SPC is committed to setting up a project office employing Chinese personnel and to transferring technology. The office could be in Guangzhou or Beijing, where SPC already has an office for a lubricants joint venture.

A source said the company is likely to outsource the seismic surveys and start exploration drilling within six to 12 months, once rigs and personnel are organised.

The acquisition of the China block comes after SPC chairman Choo Chiau Beng said in June that the company was looking for E&P acquisitions for up to US$650 million to lift its oil production to 150,000 barrels per day to help feed its joint venture refinery in Singapore.

Mr Choo said SPC's healthy cashflow meant it could pay up to $1 billion for a company with good oil reserves. SPC was not just looking at Asean but further afield to Australia, India and the Middle East, he said.