ARCO, CNOOC SIgn Cooporation Agreement for Development of Ledong Gas Fields in South China Sea

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20 October 1997

A cooperation agreement for development of the Ledong natural gas fields in the South China Sea was signed here today by the chief executives of Los Angeles-based ARCO and the China National Offshore Oil Corp (CNOOC).

The three fields, covering about 925 square kilometers (357 square miles), were discovered in 1996 by Nanhai West, a CNOOC subsidiary, about 100 kilometers (62 miles) southwest of Hainan Island. ARCO currently operates China's largest offshore natural gas field, Yacheng 13-1, in a nearby area of the South China Sea.

The agreement signed today by CNOOC President Wang Yan and ARCO Chairman and Chief Executive Officer Mike R.Bowlin clears the way for the two companies to combine resources to determine the economic viability and possible development of the discoveries.

Toward this end, ARCO will complete an engineering and geology evaluation of the fields, assess recoverable reserves and identify markets for the gas. If the two companies agree that the area is worth joint development, they will begin further cooperation in the near future.

In 1981, ARCO became the first foreign oil company to sign an offshore exploration contract with the People's Republic of China. This led to the 1983 discovery of the Yacheng 13-1 gas field with its 3 trillion cubic feet of reserves southwest of Hainan Island. CNOOC, ARCO and Kuwait Foreign Petroleum Exploration Co. are joint developers of that field. Most of the Yacheng gas is delivered to the Black Point Power Plant in Hong Kong via a 480-mile subsea pipeline. Another pipeline makes gas deliveries to Hainan Island.

"The Yacheng 13-1 pipeline infrastructure will play a critical role in determining the commerciality of the Ledong gas fields," said Bowlin. "If development proceeds, the project will enable CNOOC and ARCO to build additional value in the South China Sea and supply cleaner-burning natural gas for the energy growth needs of southern China."

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