Sinopec to seal agreement with Shell and Unocal

Jan 22, 2003 01:00 AM

Sinopec revealed that it is near finalizing a development production sharing agreement with Shell and Unocal for the Xihu Trough in China's East China Sea. The agreement is expected to be signed in March.
Sinopec said the negotiations took longer than expected because of different views on farm-in compensation. It was supposed to have been completed last summer but the participants were unable to reach a compromise on the value of the gas reserves in the play, estimated at approximately 2.8 tcf.

Shell and Unocal farmed into the Xihu project after the Chinese had proven the reserves in Xihu's Chunxiao Fields, thus in the new PSA, it has been agreed that the two will pay an undisclosed amount for an estimated reserve base that is less than the 2.8 tcf Sinopec figure, then, should the reserves prove to be more, Shell and Unocal will add to their payments.
The Xihu Trough project PSA covers three exploration and two development blocks in a total area of 20,000 sq km some 400 km east of Shanghai.

Development cost for the first phase, the Chunxiao Field, is estimated at approximately $ 1 bn. It is scheduled to commence production in 2005.
Under the new PSA, Sinopec and CNOOC will each hold 30 % interest in the project, with Shell and Unocal each holding 20 %.

Source: OGI
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