ExxonMobil to drill in South China Sea Block 119

ExxonMobil plans to drill an exploration well on Block 119, off central Vietnam in April, potentially angering China, which has objected to similar plans in the past. China had earlier warned Phillippines against any oil exploration without its consent in waters it claims in the South China Sea after the Philippines announced plans for possible drilling.

South China Sea tops the list of most disputable topics of Southeast Asia. Where the lingering territorial dispute among Brunei , China, Malaysia , the Philippines, Taiwan, and Vietnam over parts or all of the  Spratly Islands in the South China Sea does not appear ripe for any near-term solution.

Block 119 is located off Danang city and the adjacent Quang Ngai province, the Vietnam News reported, but it was not immediately clear if the drilling was in a disputed area claimed by both countries.

Some of the current exploration projects situated in the South China Sea:

Source: Derrick Petroleum Planned Exploration Wells Database

China, which claims all of the South China Sea including the Paracel archipelago east of Danang, reportedly warned ExxonMobil to drop an exploration deal in the seas off Vietnam in 2008, though it is not clear if Block 119 was part of those objections.

Transactions that have taken place in the South China Sea in past few years:

Source: Derrick Petroleum E&P Transactions Database

China's increasingly assertive role in the South China Sea has raised tensions with other countries in the region as well as the United States.

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Shell plans to drill 17 exploration wells in China!!

Shell plans to spend about $1 billion annually over the next five years on the shale gas projects in China and plans to drill about 17 wells, including probes for tight gas and shale gas, in regions including Sichuan, China’s most prolific gas province.

• Inspired by the massive success of unconventional gas – coal seam methane, tight gas and shale gas – in the US , China over the past year embarked on an exploration campaign for shale gas, part of Beijing’s goal to boost use of cleaner burning fuel and cut coal.
• China does not have any shale gas production yet, but Shell has a rough target to pump some 10 per cent of its total gas output from shale gas by 2020.
• Petrochina and Shell drilled the first evaluation well on the Fushun block in the Sichuan province of southwestern China. The Fushun block occupies an area of about 4000 sq km. 

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This happens to be the first joint shale gas development project signed by the two companies with an intention to explore the untapped resources in China.The project is expected to assess China’s shale gas potential and capture the unconventional source of cleaner-burning fuel to meet that country’s increasing demand for fuel.

This is not the first time when PetroChina and Shell jointly landed on a gas development project in China. They also share a deal at Changbei natural gas field in the Shaanxi province of China. Also, Just a year ago, Shell and China National Petroleum Corp (CNPC), parent of PetroChina, signed a 30-year deal to develop another tight-gas block in Sichuan province.

China lags the U.S. in terms of development of shale gas, which is a foremost contributor to future energy mix. Will US's success in the unconventionals be replicated by China? .... its too early to comment!!! 

CNOOC reported 2010 Annual Results; Production up 44.4% over 2009; Plan to invest US $5.05 billion for Development projects in 2011

CNOOC’s 2010 net production reached 328.8 mmboe, reached 2010 production guidance of 327-329 mmboe. The production growth is mainly attributable to production from new fields brought on stream since 2009, outstanding performance of the producing fields and the production contribution from newly acquired projects. In 2010, the Company’s reserve replacement ratio amounted to 202%.

In 2010, the Company achieved 12 independent discoveries and successfully appraised 12 oil and gas structures by 18 appraisal wells in offshore China. In respect of exploration under production sharing contracts, besides the deepwater discovery of Liuhua 29-1, 3 oil and gas structures were successfully appraised by 5 appraisal wells.

CNOOC plan to invest US $8.77 billion in 2011, in which US$5.05 billion allocated for development projects.

CNOOC’s 2010 overseas acquisitions and JV’s:

Source: Derrick Petroleum E&P Transactions Database

The company projected 6-10% production growth for 2011-2015

Shell to spend $5 billion over 5 years on China shale gas. Unconventional gas fever spreads across US, Europe and now in China…

Shell aims to spend $1 billion a year on shale gas in China over the next five years if its exploration work currently underway proves to be a success. "It’s too early to say that shale gas is game changer in China but I have great expectations. We are drilling 17 wells this year in regions such as southwestern Sichuan province. That will give us a sense of magnitude of what's available here," said Shell chief executive, Peter Voser. China does not have any shale gas production yet, but has a rough target to pump some 10% of its total gas output from shale gas by 2020. "If we are successful, we are aiming to spend $1 billion a year over the next five years on shale gas," Voser said, adding that Shell was already spending $400 million on unconventional gas in China this year.

Chinese shale gas exploitation speeds up!!

China will start the bidding for eight shale gas blocks located in Guizhou, Chongqing, Anhui and Zhejiang in this year, and each block covers an area of 6,000-7,000 sq km, according to Zhang Dawei, deputy director of the Oil and Gas Resources Strategy Research Centre under the Ministry of Land and Resource (MOLR). According to MOLR’s Oil & Gas Research Centre, China is aiming to increase its shale gas reserves to 1 trillion cubic metres by 2020. The government is also expected to introduce new policies to encourage shale gas exploration, including the reduction or exemption of royalties and import tariffs and value added tax for the import of key equipment needed for shale gas exploration, according to Zhang.

Zhang has revealed that more companies, such as Sinochem Group, Xinjiang Guanghui Group and Zhenhua Oil Co Ltd, that have experiences in overseas petroleum and gas exploration are added in the bidders list. The participation of these private companies will break up the monopoly of state-owned enterprises like PetroChina, Sinopec, CNPC and Shaanxi Yanchang Petroleum in this market.


Shell’s presence in China is marked by these transactions

Just a year ago, Shell and CNPC signed a 30-year deal to develop another tight gas block Jinqiu in Sichuan province. Shell recently started drilling two shale gas exploration wells in Fushun Block in Sichuan province. ConocoPhillips will soon finalise terms with PetroChina for a shale gas production sharing contract for a block close to Statoil’s acreage. Also, Sinopec is in talks with BP and Chevron about potential co-operation. Not only the local private companies are interested in exploiting these Chinese shales, but also industry majors like ConocoPhillips, Statoil, etc.,