Bloomberg: CNOOC to Develop Gas Field Without Unocal, Shell (Update1) (ShellNews.net)

Sept. 29 (Bloomberg) -- CNOOC Ltd., China's biggest offshore oil and gas producer, said the withdrawal of Unocal Corp. and Royal Dutch/Shell Group from its East China Sea gas venture won't prevent production from starting up on schedule by mid-2005.

A group led by CNOOC and including China Petrochemical Corp. started drilling in the area in October last year, prompting the Japanese government's concern that its share of the gas may be siphoned off. The Chunxiao field, the first to be developed in the area known as the Xihu Trough, straddles the border between the nations.

``The change of partners has little impact on the on-going project,'' Fu Chengyu, chairman and chief executive of Hong Kong- listed CNOOC, said in a statement to the Hong Kong stock exchange.

Unocal and Shell agreed in August last year to each take a 20 percent stake in the Xihu Trough project, the companies said in statements. The contracts allowed each side to make a final investment decision after 12 months of appraisal and analysis. CNOOC and China Petrochemical each own 30 percent of the project.

Japan

The border dispute flared up earlier this year when Japan became aware of drilling by the Chinese-led group in the East China Sea. Chinese Foreign Minister Li Zhaoxing proposed to Japan in June that the two nations consider joint development.

Unocal's withdrawal ``had nothing whatsoever to do with that,'' Unocal spokesman Barry Lane said in an interview in California, referring to the Japanese protests. The decision ``was based solely on an analysis of resources and was made for commercial reasons.''

Japan's Natural Resources and Energy Agency and the Ministry of Foreign Affairs couldn't provide any comments on Shell and Unocal's decision to withdraw from the project.

Applications to the Japanese government by Teikoku, Inpex and units of trading companies Marubeni Corp. and Sojitz Holdings Corp. for permission to develop the gas fields haven't been approved, Kunihiko Matsuo, president of Inpex Corp. and head of Japan Petroleum Development Association, said earlier this month.

Unocal will take a charge of about $10 million in the third quarter after withdrawing, the El Segundo, California-based company said in a statement distributed by PRNewswire.

China Petrochemical is the parent company of China Petroleum & Chemical Corp., or Sinopec, Asia's largest oil refiner and China's second largest oil company.

To contact the reporters on this story:

Wing-Gar Cheng in Beijing at wgcheng@bloomberg.net;

Hector Forster in Tokyo at

3359 or hforster@bloomberg.net

To contact the editor responsible for this story:

Reinie Booysen at  rbooysen@bloomberg.net.

Last Updated: September 29, 2004 00:02 EDT

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