Wednesday, 9 October 2013

Offshore exploration tender issued by CNOOC

China's leading offshore oil producer, the state-run CNOOC, has issued a tender on the company website yesterday inviting IOCs to bid to participate in the exploration of 25 oil and gas blocks, the majority of which are located in the South and East China Sea. The blocks cover a total area of 102,577km2, include 10 highly attractive deep-water patches and represent the largest offshore tender offered (in terms of real size) by China since the 1990s.
The announcement is the latest in a series of moves by China to assert its claims in the strategically-located South and East China Sea by launching tenders for oil and gas blocks, as well as frequent diplomatic manoeuvres and shows of military strength. Tellingly, the Chinese President Xi Jinping and Japanese Prime Minister Shinzo Abe did not formally meet at the Asia-Pacific Economic Co-operation summit last week, following an escalation of tensions between the two Asian giants over the sovereignty of the Senkaku/Diaoyu Islands in the East China Sea. Last week, Abe made a defiant statement claiming that Japan would not make any concessions on its territorial integrity.
Two of the newly announced blocks, 33/02 and 41/14 in the Lishui Sag area, are located in close proximity to the disputed Islands, whose purchase by Japan last year reignited the centuries-old question over ownership. The state-run company is also thought to be investing $5 billion in developing submerged gas fields in the East China Sea, with the possibility of tapping gas deposits in Japanese waters through diagonal and horizontal drilling methods. The company has already come under scrutiny this month from Green Dragon Gas, which claims that CNOOC breached production sharing contracts by drilling wells on its licences without notification.
In June, China angered Vietnam by inviting IOCs to jointly participate in the development of nine blocks in the waters around Hainan, blocks which Hanoi considers overlap into their maritime territory. CNOOC's usual operating procedure is to team up with foreign firms during the exploration phase, but holds the right to take a 51% in the block once a commercial find is made. PetroVietnam was involved in a dispute with its northern neighbour last December when Beijing accused it of 'unilateral oil and gas exploration activities'.
For more background on the China-Japan Islands dispute, please refer to our previous news story dated 30 September 2013.

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