China

June 18, 2012

In the aftermath of the Peng Lai oil spill in Bohai Bay, the State Oceanic Administration of People's Republic of China has reached agreement with China National Offshore Oil Corporation (CNOOC) and ConocoPhillips China (COPC) whereby the two oil companies are to pay $267 million in compensation for marine ecological damage. Additionally, CNOOC and COPC will respectively provide $76 million and $18 million for environmental protection.

In June 2011, two incidents caused around 3200bbls of oil and mud to be leaked near platforms at the Peng Lai 19-3 field, operated by ConocoPhillips with a 49% interest and co-owned by CNOOC, holding 51%, leading to cessation of production in September. Government approval to resume production is pending.

CNOOC has made a discovery with the well Dongfang (DF)13-2 in a HP/HT natural gas reservoir in the Yinggehai Basin, western South China Sea, following the successful appraisal of the DF13-1 gas field in 2010. DF13-2, drilled in a water depth of 65m to a TD of 3168m encountered gas pay zones totaling 35m in thickness that test flowed at an average rate of 42.4mmcf/d of gas.

China National Petroleum Corporation (CNPC) and Shell China Exploration and Production have signed a production sharing contract for shale gas exploration, development and production in the 3500km2 Fushun-Yongchuan block in the Sichuan Basin, China, reputedly the first shale gas PSC in China.

Moreover, Shell and Hess are reported to be in talks with PetroChina concerning development of shale oil in the Santanghu Basin in northwestern Xinjiang Province for which Turpan-Hami Oilfield has already received approval in joint venture with two other companies.

China National Petroleum Corporation and Shell China Exploration & Production have signed a production sharing contract for shale gas exploration, development and production in the 3500km2 Fushun-Yongchuan block in the Sichuan Basin, China, reputedly the first shale gas PSC in China. Moreover, Shell and Hess are reported to be in talks with PetroChina concerning development of shale oil in the Santanghu Basin in northwestern Xinjiang Province for which Turpan-Hami Oilfield has already received approval in joint venture with two other companies.



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