Shell signs strategic alliance agreement with CNOOC
BEIJING�Shell Overseas Investments BV�a wholly-owned subsidiary of Royal Dutch/Shell Group�and China National Offshore Oil Corp. have agreed to jointly develop projects in oil and gas exploration and production and gas marketing.
The deal calls for Shell to purchase 20%�or up to $300 million�of shares from the initial public offering of CNOOC Ltd., the IPO vehicle of CNOOC. A previous estimate was $200 to $400 million (OGJ Online, Nov. 13, 2000).
CNOOC will launch its IPO on Hong Kong and New York Stock Exchanges in February and plans to raise up to $2.5 billion.
CNOOC is in talks with BP on another strategic alliance. Officials of CNOOC report BP could invest up to $200 million in CNOOC Ltd. BP declined to comment.
In September, Shell bought 14% of the initial public offering of China Petroleum & Chemical Corp. (Sinopec). Sinopec launched an IPO last month, raising $3.73 billion.
In October, Shell and CNOOC signed a 50:50 joint venture contract to build an 800,000 tonnes/year ethylene cracker in Huizhou in southern China's Guangdong province.
CNOOC, China's major offshore oil operator, is expanding into downstream businesses like petrochemical manufacturing, natural gas retailing, and power plant operation.
The company is also expected to double its oil production to 30.3 million tonnes/year and produce 10 billion cu m/year of gas by 2005, up from 4 billion cu m/year currently.
Shell, CNOOC agreement
According to the agreement, Shell and CNOOC will soon sign petroleum contracts for the joint exploration and development of five oil and gas fields in three blocks in the Bohai Sea.
The fields are about 100 km north of Longkou in 100 m of water with estimated hydrocarbon reserves of 1 tcf of gas and 600 million-700 million bbl of oil.
The two companies plan to supply 400-800 million cu m of gas a year from production in Bohai to users in Shandong.
In the East China Sea, CNOOC and Shell will participate in natural gas exploration and production in the Xihu trough, which is 350 km southeast of Shanghai.
CNOOC and Shell will also jointly market natural gas to users such as power plants in eastern China, including Shandong, Anhui, Henan, Jiangsu, Shanghai, Fujian and Zhejiang provinces, through their production in the East China Sea.
They will jointly conduct feasibility studies for a gas transportation network linking major coastal cities in east China and will form joint ventures where they see fit. The pipeline studies are expected to start in 2001.
CNOOC has announced that the company will build a 4,000-km gas pipeline grid along China's coast to sell its gas in eastern China.
CNOOC and Shell have agreed to jointly operate LPG facilities for automobiles in Beijing. CNOOC will supply liquefied petroleum gas to Shell's existing gasoline retail stations in Beijing.