China National Offshore Oil Corp. has plenty to get excited about these days. After years of touting the unexplored and hidden depths of the South China Sea, the company has finally scored a coup with its first independent deepwater discovery.
The company earlier this week announced the success of the Lingshui 17-2-1 wildcat well, hailing it as a major breakthrough in exploration efforts.
This is the company’s first deepwater find in Chinese waters without the help of foreign companies. The well was also drilled using CNOOC’s wholly-owned Haiyang Shiyou 981 semisubmersible rig, making it even more memorable. Prior to this, CNOOC had only been making small to mid-sized discoveries, most of which in shallower water and areas it is familiar with.
The Lingshui discovery is the first deepwater find in China in close to a decade, after the Liwan 3-1 field discovered by Canadian Husky Energy in 2006. It tested with a flow of 56,500 Mcf/d of natural gas. The 500,000 Mcf/d Liwan gas project started up earlier this year and now supplies gas to southern Guangdong province.
More than anything, it signals that China still has more upstream prospects to offer, particularly to Western mid-caps and majors which have increasingly exited projects in Asia at a time when capital budgets are squeezed and more attractive plays are on offer in Africa and North America.
The Liwan find ignited interest in deepwater drilling in surrounding areas from the likes of BG, Eni and Anadarko and more recently, BP and Chevron. A series of dusters in the last few years however, have put a damper on things.
The Lingshui field lies in about 1,500 meters water depth in the frontier Qiongdongnan Basin. CNOOC has drilled two appraisal wells to evaluate the prospect although no reserve estimate has been revealed.
Consultancy Wood Mackenzie is not ruling out the possibility that Lingshui could have proved and probable reserves as large as over 2 Tcf, in which case CNOOC would have hit a bonanza that would shore up its domestic production. The company is grappling with natural declines at many of its legacy fields in the Bohai Bay.
The project will likely be developed in a similar manner to Liwan, with CNOOC applying expertise gleaned from its partnership with Husky, Woodmac said. Sitting 150 km off Hainan island, the gas could potentially be sold to Hainan, Guangdong province or Hong Kong, Woodmac said.
CNOOC last week released 33 blocks in its annual offshore tender, which traditionally has seen little uptake due to the perceived uncertain prospecs in the offshore. This could change this year as five deepwater blocks up for tender lie close to the Lingshui discovery.
Source: Platts
