Husky natural gas discovery still needs evaluation, CNOOC says

Recoverable reserves in the natural gas field discovered by Husky Energy in the South China Sea last week need further evaluation before being confirmed, said sources with China National Offshore Oil Company Limited (CNOOC Ltd.) Tuesday.

Xiao Zongwei, spokesman for CNOOC Ltd., told Xinhua that it was still too early for CNOOC Ltd. to announce the discovery of an enormous natural gas field.

Canada-listed Husky Energy Inc. announced last Wednesday that the Liwan 3-1-1 field identified on block 29/26, a production sharing contract (PSC) block with the CNOOC in the Pearl River Mouth Basin, was estimated to contain a potential recoverable reserve of four to six trillion cubic feet of natural gas.

Husky announced on its website that the discovery was one of the largest natural gas discoveries offshore China.

Husky found natural gas in its first well drilled in the block. The recoverable reserve of the possible field could be confirmed only after more wells were drilled and further evaluations were made, said Xiao.

Under the PSC between Husky and CNOOC signed in 2004, CNOOC Ltd. has a stake of up to 51 percent in the development of any discovery.

After Husky announced the possible discovery, the CNOOC saw a 12 percent rise of its share price on the Hong Kong Exchanges and Clearing Limited (HKEx) over two days last week.

Husky still has a 100 percent interest in the block and CNOOC Ltd. was still a long way from making a decision on whether or how much interest it would take in the development, said Xiao.

Further exploration and evaluation, a development plan, and agreement from both sides and the Chinese government on the development plan were still required, he said.

Government permission was essential to commercial development, he said.

A circular released by CNOOC Ltd. on the HKEx on Monday said hydrocarbon reserves of the discovery needed further evaluation and CNOOC's decision on whether to exert its investment interests depended on the assessment yet to be made.

If confirmed, the discovery, drilled at a depth of 1,500 meters, may be the first significant deep-water gas discovery offshore China, indicating a possible huge increase in China's oil and gas reserves, said experts.

Incorporated in Hong Kong in August 1999, CNOOC Ltd. is a 70.64 percent held subsidiary of China National Offshore Oil Corporation (CNOOC), China's largest offshore oil and gas producer.

Source: Xinhua