Phillips undertakes coalbed methane, petrochemical projects in China

Phillips Project Area [18470 bytes]

Phillips Petroleum Co., in a major expansion in China, will operate a new joint-venture (JV) coalbed methane project and will cooperate on new petrochemical projects with China National Petrochemical Corp. (Sinopec).

Coalbed methane

Unit Phillips China Inc., Beijing, and CBM Energy Associates LC signed an agreement making the Phillips' unit majority interest owner in and operator of the 781,000-acre Hedong coalbed methane concession in Shanxi province, about 120 miles west of Taiyuan, province capital, and about 260 miles southwest of Beijing (see map).

Phillips will be assigned a 65% interest in the Hedong concession. Chinese partners own 30% and CBM 5%.

CBM is a private limited liability company owned 45% by Texas Crude Energy, Houston; 45% by Evan Energy, Richmond, Va.; and 10% by Marshall Miller & Associates, Bluefield, Va.

Seismic and drilling operations are scheduled to begin early in 1997 on the Hedong concession.

"This project enables us to use our technology and experience in coalbed methane production gained from our operations in the San Juan basin in New Mexico," said Knut Am, Phillips senior vice-president of exploration and production.

The coalbed methane JV is the company's first onshore project to explore and produce hydrocarbons in China. Phillips operates Xijiang oil fields in the South China Sea and a Bohai Bay exploration permit.

Petrochemical project

In the deal with Sinopec, Phillips signed a letter of intent calling for the parties to share their expertise, technology, and financial resources to pursue projects of mutual benefit and strategic value in the development of new petrochemicals projects.

Phillips already is involved in constructing a 220-million lb/year high-density polyethylene plant (HDPE) scheduled for 1998 start-up at Shanghai with co-venturer Shanghai Petrochemical Co. Ltd. (SPC). The complex will use Phillips' proprietary advanced HDPE technology.

Sinopec, responsible for the operation of all state-owned petrochemical businesses in China, is majority shareholder in SPC.

As part of the petrochemicals agreement, Phillips and Sinopec agreed to study feasibility of expanding the Shangai plant now under construction by an additional 440-550 million lb/year, with Phillips holding a 40-50% interest in the additional capacity. Currently, Phillips has a 40% interest in the project, and SPC has 60%.

Phillips is also studying a number of other projects with Sinopec units, including building an ethylene cracker, as well as manufacturing Phillips' HDPE pipe, K-resin copolymer, polyethylene, and polypropylene.