Cnooc Says South China Sea Gas Discovery Needs Verification

Cnooc Says South China Sea Gas Discovery Needs Verification

Cnooc Ltd., China’s largest offshore oil producer, said the hydrocarbon potential in a gas discovery with Husky Energy Inc. in the South China Sea requires “further verification” and advises investor caution.

The discovery in the Pearl River Mouth Basin may contain as much as 6 trillion cubic feet of gas, Calgary-based Husky said in a statement on June 14. It’s the first deepwater discovery off China’s coast, Husky said.

“The hydrocarbon potential of the contract area has yet to be ascertained and will require further verification,” Cnooc said in a statement to the Hong Kong stock exchange today. “A number of procedures have to be completed before production commences.”

China, the largest energy consumer after the U.S., wants its oil companies to speed up exploration and boost production to meet demand in an economy that grew 10.3 percent in the first quarter. Cnooc, which failed in its attempt last year to buy U.S. oil and gas producer Unocal Corp., has invested at least $2.7 billion in projects abroad including oil fields in Nigeria and Australian gas ventures.

Cnooc advised investors to exercise caution when dealing with its shares, the statement said. “Any evaluation of the hydrocarbon potential of any particular contract area expressed by the operator or other persons would only constitute preliminary estimates and may or may not be accurate.”

Cnooc shares closed at HK$5.90 in Hong Kong on June 16, after rising 35 cents, their biggest gain in almost a year.

Cnooc will evaluate the hydrocarbon potential of the field and terms of its contract with Husky before deciding on taking an equity stake, the statement said.

Under Cnooc’s exploration contracts with foreign partners, the Chinese company has a right to acquire, at no cost, as much as 51 percent of any discovery.

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