Lloyds List: Shell and Unocal quit Xihu Trough gas project: ROYAL Dutch/Shell and US oil independent Unocal have pulled out of the Xihu Trough offshore natural gas project in the East China Sea because of failure to renegotiate commercial issues, writes Martyn Wingrove.” (ShellNews.net)

Oct 05, 2004

ROYAL Dutch/Shell and US oil independent Unocal have pulled out of the Xihu Trough offshore natural gas project in the East China Sea because of failure to renegotiate commercial issues, writes Martyn Wingrove.

The two companies each held a 20% stake in the exploration and gas development project, but have terminated their involvement, leaving it in the hands of China National Offshore Oil Corp.

The two companies agreed to assume all the financial risks during the 12-month exploration phase, but were unable to move the project forward into a commercial project.

'Over the past year we have conducted a detailed resource assessment and studied various development options,' said Don Hansen, vice president of Unocal International Energy Operations.

'For commercial reasons we have elected not to proceed with the project.'

Both companies entered into the project in August 2003 and had 12 months to find and appraise gas resources in the area. Then the partners had to make a financial decision to move ahead with an offshore development. But it seems the potential earnings for the project was too small for both companies.

CNOOC and Chinese refiner Sinopec said they would continue with the project.