CNOOC inks new natural gas deal

A undated file?photo of an Orient 1-1 gas field exploration platform of CNOOC in South China Sea.[Photo/IC]

China's top offshore oil producer has signed a new contract to supply natural gas to CLP Group, the Hong Kong-based power utility, from a gas field in the west of the South China Sea.

The supply will start in 2018 from China National Offshore Oil Corporation's Wenchang gas field after its completion of a 33-kilometer pipeline between there and its Yacheng gas project.

The latter supplies a third of CLP's total electricity, or a quarter of Hong Kong's total.

The new deal is expected to offset declines in production at Yacheng, which signed a two-decade gas supply contract with CLP in 1996.

CNOOC said on Monday that Yacheng 13-1, the country's largest offshore gas project, has already supplied 50 billion cubic meters of natural gas to Hong Kong and Hainan province over the past two decades.

Located 91 kilometers southwest of Hainan, Yacheng 13-1 pumps an annual average of 2.5 to 3 billion cubic meters of natural gas.

Shen Hong, general manager of CNOOC China Ltd Yacheng Operating Company, said about 80 percent of its production goes directly to Hong Kong, with the rest to Hainan.

As Yacheng's natural gas reserves are not meeting increasing demand, CNOOC has been seeking to generate more from the western part of the South China Sea, he said.

Annual output from new gas projects in Dongfang and Wenchang is expected to reach 3.7 billion cubic meters in the next few years.

The South China Sea is home to vast reserves of oil and natural gas. CNOOC's daily gas output topped 1 million cubic meters in 2012 from a single well in the Dongfang 13-2 field, making it one of China's largest offshore gas discoveries.

Annual production at its Ledong gas field once peaked at 2 billion cubic meters.

CNOOC plans to build a giant pipeline network that will link all major gas fields in the South China Sea, including Dongfang, Yacheng, Ledong and Wenchang, plus others in deep-water areas.

Gas output from the sea is likely to reach 300 billion cubic meters per year, experts say.

Lin Boqiang, director of the China Center for Energy Economics Research at Xiamen University, said that gas exploitation in the area is part of the country' long-term goal to satisfy its growing energy consumption.

"Reliable gas supply in the South China Sea supports the country's efforts to optimize its energy mix toward cleaner sources and reduce its reliance on coal," he said.