Royal Dutch Shell PLC Wednesday signalled its return to offshore exploration in China when it signed three deals with China National Offshore Oil Corp., or CNOOC Group, to explore for oil and gas off both China and West Africa.
The offshore deals come on the heels of a megadeal on Monday by CNOOC’s listed unit CNOOC Ltd., to purchase Canadian oil-and-gas producer Nexen Inc. for $15.1 billion in part to gain operational expertise and to ensure China’s energy security.
Shell signed two production-sharing contracts with CNOOC to explore a pair of offshore oil blocks in the Yinggehai Basin, marking Shell’s return to Chinese shores after nearly 10 years absence, Shell spokeswoman Li Lusha said.
The blocks, 62/02 and 62/17, lie between Vietnam and Hainan island in the highly contentious South China Sea. The blocks are on the Chinese side of the maritime boundary and aren’t in disputed waters, Ms. Li said.
Meanwhile, Shell also signed an agreement to explore for oil and gas off the coast of Gabon in West Africa with CNOOC. Under the deal, whose financial terms weren’t disclosed, CNOOC will acquire a 25% stake in a pair of offshore exploration blocks BC9 and BCD10. CNOOC will reimburse Shell for a quarter of the western oil major’s past exploration costs and partially pay for future exploration. The blocks are in water between 1,200 and 2,100 metres deep and are considered deepwater assets, Ms. Li said.
Shell, along with France’s Total S.A., is one of the biggest oil producers in the tiny nation of Gabon, which pumps around 240,000 barrels a day of crude. Shell has operated in the country since the early 1960s after it discovered oil in the Gamba area. It currently produces about 65,000 barrels a day of crude from five fields.
CNOOC has been trying to improve its deepwater expertise and technology by inviting foreign partners to jointly develop deepwater blocks in the South China Sea. In June, it made nine offshore blocks available for joint development with foreign companies. Analysts, however, were skeptical that foreign partners would participate because the blocks were located in what Vietnam said were disputed waters.
CNOOC also has been trying to develop its own deepwater abilities. In May, the company began operating its first deepwater drilling rig capable of operating at a depth of 3,000 metres.
