China's CNPC to offer new oil and gas blocks this year

Ulhas Joglekar ulhasj at
Thu Mar 2 07:24:44 PST 2000

The Economic Times Online Tuesday FEB 29 2000

China's CNPC to offer new oil and gas blocks this year Chen Aizhu SINGAPORE 28 FEBRUARY CHINA'S largest oil major China National Petroleum Corp (CNPC) is expected to offer new onshore oil & gas concessions to foreign companies in the second half of this year, company officials said. They said the government had given CNPC the go-ahead at the end of last year, including some untapped areas in the northwest and regions already producing oil or gas in the northwest and northeast. CNPC was expected to release background data on the new blocks around June, they said. "This year would be a year for us to step up opening the upstream sector to foreign companies. Official invitation for bids will probably take place in the second half this year,” said a Beijing-based CNPC official. Industry sources said CNPC planned to offer at least 20 blocks this year, but company officials said the number had yet to be finalised. Blocks to be offered would include unexplored and producing areas in the Tarim and Turphan-Hami basins in Xinjiang, Qaidam Basin in northwest Qinghai province and Erdos Basin in Shaanxi Province. Blocks would also be offered in producing basins in the northeast, which accounts for nearly two thirds of CNPC's crude production, company sources said. Company officials said the new concessions had better prospects for success than ones CNPC had offered since ’93. "The blocks have higher chances of return than earlier ones...,” said a senior company official who declined to be identified. The corporate tax on oil and gas companies operating in central and western China had also been cut to 15 per cent, effective January 1, from 33 per cent, he noted. The tax cut was one of a number of government incentives to draw more investment to China's less developed central and western regions in the next five years. "We are also ready to offer more flexible terms in contract negotiations. In one word, we are looking to strike a win-win situation with our foreign partners,” said the official. — Reuters "For instance, for high-cost commercial discoveries, we would probably take a 25 to 35 per cent stake in joint development, rather than the 51 per cent set by previous contracts.” CNPC has the right to take stakes of up to 51 per cent in joint production projects. CNPC has to date been the exclusive state oil company handling onshore and shallow sea concessions. It has signed 48 exploration and production contracts with foreign companies since it first opened concessions in the northwest Tarim Basin in March ’93, CNPC officials said. The contracts have lured actual foreign investment of around $580m out of a contracted $1.1bn as of the end of ’99, in concessions with a total area of over 25,000 square kilometres, they said. But exploration in the areas has yielded only one oil discovery and minimal production. The discovery, an oilfield expected to produce 34,900 barrels per day (bpd), was made in ’94 in the Zhaodong block off of China's Bohai Sea by US oil company Apache Corp. In ’99, oil production from the concession accounted for less than two percent of CNPC's total output of 107.1m tonnes, or 2.2m bpd. Surging world oil prices have brought pain to energy-hungry China, prompting calls to build up strategic fuel stocks, accelerate development of natural gas and hydropower and speed up construction of pipelines from remote western oilfields to refineries along the fast-growing east coast. China expects to import 42m tonnes of crude this year with demand growing four percent annually this century. — Reuters

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