Bloomberg News

CPC May Invite Chinese Companies to Join Oil Search Near Taiwan

March 17, 2009

CPC Corp., Taiwan’s state-owned oil company, may invite its mainland Chinese counterparts to jointly search for oil and gas in waters near the island to share costs.

CPC may extend its partnership with China National Offshore Oil Corp., if blocks off Taiwan’s coast show evidence of oil or gas, said John Hsu, chief executive of CPC’s exploration and production division. The companies are jointly exploring the Taiwan Strait, which separates the island from the mainland.

“We want to reduce risks by sharing stakes,” Hsu told reporters in Taipei today. “You don’t know if you can find anything when drilling a well.”

The refiner, which has investments in Africa, Southeast Asia, the U.S., Australia and Latin America, is seeking to cut crude import costs by acquiring overseas oil assets, the company said in January. It’s also drilling wells on the island and offshore. Taiwan imports about 99 percent of its energy needs.

Early estimates show that a block off Taiwan’s northwestern Miaoli county may have potential to produce 20 million barrels of oil and another near the southern Kaohsiung city may hold as much as 100 billion cubic meters of natural gas, Hsu said.

The refiner and China National Offshore, the parent of Hong Kong-listed Cnooc Ltd. (883), agreed in December to expand their search for oil and gas overseas and in the Taiwan Strait.

Taiwan Strait

CPC and China National Offshore renewed through 2010 an agreement signed in 2002to drill three exploratory wells in the southern part of the Taiwan Strait. The companies will also study the feasibility of exploring in the Nanridao basin in the northern part of the strait, CPC said in December.

China National Petroleum Corp. and China Petrochemical Corp., both based in Beijing, are also possible partners, Hsu said.

Ties across the Taiwan Strait have improved since Taiwan President Ma Ying-jeou took office on May 20, abandoning his predecessor Chen Shui-bian’s pro-independence stance. Mainland China has threatened to use force to bring about unification if the island declares independence.

CPC operates 42 oil and gas wells in Taiwan and plans to drill three this year, the company said in a report to lawmakers yesterday. Natural gas produced on the island accounted for about 3 percent of gas supplies last year.

Drilling a well costs between NT$800 million ($23 million) and NT$1 billion, Hsu said.

CPC bought a 30 percent share in a Kenyan exploration block from China National Offshore in December. The Taiwan refiner signed a contract with the Belize government for a 4,800 square- kilometer (1,853 square-mile) offshore block, the Taipei-based company said in a statement on Jan. 15.

To contact the reporter on the story: Yu-huay Sun in Taipei ysun7@bloomberg.net

To contact the editor responsible for this story: John Viljoen at jviljoen@bloomberg.net.


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