PetroChina gets licenses to explore near Spratlys
Wednesday, July 7, 2004 10:55 PM


PetroChina gets licenses to explore near Spratlys

SINGAPORE - Energy-starved China has allowed its top oil producer PetroChina to explore for oil and gas in the southern part of the South China Sea, in an area industry sources said was near the disputed Spratly Islands.


The Spratlys -- a cluster of rocks and reefs potentially rich in oil and natural gas -- are claimed in whole or in part by China -- the world's second-largest oil consumer and net importer -- Taiwan, the Philippines, Brunei, Malaysia and Vietnam.


"We confirm that PetroChina applied to the Ministry of Land and Resources for oil and gas exploration and production licences covering the southern part of the South China Sea to commence offshore crude oil and natural gas exploration and production activities," Mao Zefeng, head of PetroChina's investor relations, said on Tuesday.


"We also confirm that the Ministry of Land and Resources of PRC has recently granted the licences to PetroChina," he said by telephone from Hong Kong, reading a statement just released by the company's head office in Beijing. PRC refers to the People's Republic of China.


Mao declined to reveal the exact area PetroChina had been allowed to explore, but a Chinese industry source told Reuters the block was close to the hotly disputed Spratly archipelago of more than 100 islands or reefs.


Mao did not say when the exploration would start, but added that they had begun preparatory works.


PetroChina's exploration in the South China Sea marks an erosion of the role of CNOOC Ltd as the country's dominant offshore oil and gas producer, but it is unlikely to pose any real threat to CNOOC, analysts said.


Still, shares of Hong Kong-listed CNOOC sank 2.24 percent to HK$3.275 on the news on Tuesday, while stocks of PetroChina, in which U.S. investor Warren Buffett holds a stake, gained 1.36 percent to close at HK$3.725 (US$0.4.


"It's positive news for PetroChina as they don't have production growth. Now they have bigger upside," said Michael Lee, analyst at UOB Kay Hian.


CNOOC mainly produces oil and gas with foreign oil companies through production-sharing contracts in waters near China's shores. CNOOC is the only mainland oil firm allowed to cooperate with foreign companies in the exploration and development of the nation's offshore oil reserves.


PetroChina has onshore oil fields as well as developments in Bohai Gulf off the coast of northeastern China.


PetroChina's oil production has virtually been flat in the past several years despite increased spending on exploration and production. Output at its main Daqing oil field in northeast China has been sinking following decades of pumping.
Reuters/abs-cbNNEWS.com
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