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Vol. 10, No. 7 Week of February 13, 2005
Providing coverage of Alaska and northern Canada's oil and gas industry

Kerr-McGee inks deepwater exploration pact with China

Big U.S. independent already producing from shallow water Bohai Bay discoveries at CFD 11-1 and CFD 11-2 fields; two other discoveries in final approval stages for development

Ray Tyson

Petroleum News Houston Correspondent

Kerr-McGee is taking its deepwater expertise to China under a deal that more than doubles the company’s offshore position in that country to 4.1 million acres, roughly half of which is now located in 5,000 to 10,000 feet of water in the Pearl River Mouth Basin of the South China Sea.

Under its production sharing contract with China National Offshore Oil Corp., announced Feb. 4, Kerr-McGee will evaluate CNOOC’s Block 43/11 covering 2.4 million acres about 220 miles southeast of Hong Kong. The evaluation phase likely will include seismic studies that could lead to the drilling of an exploration well, a spokesman for Kerr-McGee indicated.

Kerr-McGee said it holds a 100 percent foreign contractor’s interest during the first phase of the exploration period and that CNOOC has the right to participate with up to a 51 percent interest if Kerr- McGee enters into any development phase.

“As the largest U.S.-based independent producer in the deepwater Gulf of Mexico, we have developed expertise, technology and cost advantages that we can utilize as we explore for new energy resources in this area,” said Dave Hager, Kerr-McGee’s senior vice president responsible for oil and gas exploration and production.

Company has eight Bohai Bay discoveries

Thus far, Kerr-McGee has made eight discoveries in the relatively shallow waters of China’s Bohai Bay.

Production from the Kerr-McGee-operated CFD 11-1 and CFD 11-2 fields on Block 04/36 in Bohai Bay currently ranges from 40,000 to 45,000 barrels of oil per day. The two fields, which came into production last July, were developed using platform wells producing to a floating production, storage and offloading vessel.

Meanwhile, development of the Kerr- McGee-operated CFD 11-3 and CFD 11-5 fields on Block 04/36 in Bohai Bay is in the final approval stages for development, Kerr-McGee said. The company holds an 82 percent pre-development foreign contractor’s interest in the fields.

Company’s first deepwater contract with CNOOC

The South China Sea deal represents Kerr-McGee’s first deepwater contract with CNOOC. “This contract allows us to leverage our deepwater expertise and build on our long-standing relationship with CNOOC,” Hager said.

CNOOC has now executed eight separate contracts with Kerr-McGee.

“Our confidence in the potential of the deepwater blocks in South China Sea was further verified by Kerr-McGee’s willingness to explore these blocks, and more interests will be aroused from other foreign companies,” said Zhang Guohua, CNOOC’s senior vice present. “Kerr-McGee has developed expertise in exploring the deepwater through their producing activities in the deepwater Gulf of Mexico.”

Kerr-McGee has interests worldwide in a total of about 66 million gross acres, much of which is located offshore.

CNOOC is involved in the administrative, research and services functions for the People’s Republic of China’s offshore petroleum industry, as well as other midstream or downstream petroleum projects. The company is currently engaged in exploration, development and production in four major areas offshore China, which cover Bohai Bay, the western South China Sea, the eastern South China Sea and the East China Sea.



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