Financial Times: PetroChina signs exploration deal with Total

By Carola Hoyos in London
Published: March 3 2006 01:32 | Last updated: March 3 2006 01:32
China on Thursday further opened the doors to its large natural gas industry when PetroChina, the country’s biggest oil company by production, signed an exploration deal with Total, the French energy group.
The deal to tap the Sulige field in north-west China is the second such agreement after last year’s pact by PetroChina and Anglo/Dutch Royal Dutch Shell to explore for gas in the Changbei natural gas field, which is in the same basin as Sulige.
Jiang Jiemin, PetroChina’s vice-chairman, said: “This is a very significant project because the field in three to five years’ time could produce 5 per cent of China’s total gas production. Gas demand is very, very strong, but our natural resources are limited.”
Christophe de Margerie, Total’s head of exploration and production, said during the signing ceremony in Beijing that the two companies were also exploring the development of a gas field in Iran, though he gave no details.
In China, Total and PetroChina intend to spend 30 months and $20m drilling in Sulige, said Denis de Besset, Total’s general manager for China.
Full production is ex-pected to reach 400m cubic feet a day, with the gas intended to supply Beijing via pipeline for 20-30 years.
The two companies have also agreed on the sales side of the deal, making it less likely that the project will fail in a similar way to the vast west-east gas pipeline deal.
That project saw international oil companies pull out one by one because they could not be certain the end sales price would make the project profitable.
China’s energy consumption has surged in recent years. Oil demand grew by an unexpected 16 per cent from 2003 to 2004, partly because of power capacity problems that forced the country to use oil for electricity generation.
Meanwhile, the country’s big cities have become increasingly polluted, lar-gely because of China’s reliance on coal, and Beijing has accelerated its campaign to find alternative and cleaner sources of fuel such as gas. It wants gas to supply 8 per cent of the country’s energy by 2010, up from 3 per cent today.
Recognising China’s huge potential, oil companies such as BP of the UK, ExxonMobil of the US and Saudi Aramco have lined up to work with the Chinese companies.
The National Bureau of Statistics estimates China’s gas production rose more than 20 per cent last year.
Additional reporting by Richard McGregor and Bloomberg in Beijing

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