China Petroleum & Chemical Corp. (Sinopec, 600028.SH) is speeding up the exploration of offshore oil and gas resources. A source close to the oil producer revealed that the company will drill its first deepwater well next year in the South China Sea, thus ending a moratorium on exploration in areas close to those territorial waters where rights are disputed by Vietnam.

The company has begun a 3D seismic survey in the Qiongdongnan Basin, an area of 1,250 square kilometers. After the survey, Sinopec will drill in areas offering the best exploration prospects.

Using seismic survey technology, China has found several major oil fields in recent years. These include the Nanbao Oil Field in Bohai Bay, the Puguang Gas Field in Sichuan, and the Tazhong No.1 Gas Field in the Tarim Basin.

Sinopec has obtained a license to explore more than 8,000 square kilometers in the Qiongdongnan Basin, which is estimated to have 800 billion cubic meters of natural gas. Some blocks of the basin are in territorial waters claimed by Vietnam; however, the planned survey will be conducted in an undisputed area.

The area is estimated to have about 240 billion cubic meters of recoverable reserves.

Currently, the majority of offshore oil resources in China belong to China National Offshore Oil Corporation (CNOOC). Sinopec presently only owns some shallow-water rights in north China’s Bohai Bay.

Yesterday, Sinopec spokesman Huang Wensheng said he was not aware of any company plans to drill in the South China Sea. According to insiders, however, Sinopec has worked diligently in the quest for resources, and there is no doubt that the company is accelerating the search for offshore gas and oil.

Chinese story link: http://www.dfdaily.com/node2/node27/node120/userobject1ai174207.shtml

(China.org.cn June 17, 2009)