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CNOOC’s discovery in the South China Sea has more than 100 Bcm in reserves 

China National Offshore Oil Corporation’s (CNOOC) deepsea natural gas discovery in the northern part of the South China Sea has certified reserves exceeding 100 Bcm (3,531 Bcf), reports Chinese state television. The size of the discovery makes it one of China’s biggest offshore finds and would mark a breakthrough in drilling high-temperature and high-pressure reservoirs, reports Reuters.

CNOOC first announced the discovery last August after striking high flows of gas in the Lingshui 17-2 well, with production of 56.5 MMcf/day. According to the company, the well encountered gas pay zones with a total thickness of 55 meters (approximately 180 feet) with a total well depth of 3,510 meters (approximately 11,515 feet). The well is located 150 kilometers (94 miles) south of the Chinese island province of Hainan.

Xizhou Zhou, senior director and head of China for IHS Energy, said the find was not monumental, however. The 100 Bcm find is a “decent amount, but not that substantial,” he said. The find is the equivalent to about six to seven months of Chinese gas supply demand currently. By comparison, the Marcellus Shale in the United States has estimated reserves of 64,900 Bcf, or approximately 19,780 Bcm.

“In addition, new discoveries often take years to develop, so by the time this gas starts to flow, the Chinese gas market could be much bigger than it is today,” says Zhou.

Development poses a complex problem

Not only will a new offshore development take years to reach production, the issue is further compounded by overlapping claims to the space. The South China Sea is one of the busiest shipping routes and a patchwork of overlapping claims by governments including China, the Philippines, Malaysia, Vietnam and Taiwan.

A Chinese drilling rig placed in contested waters two months before CNOOC’s initial discovery triggered a wave of violent protest among the Vietnamese, leaving at least two Chinese workers dead and 140 injured. China claims virtually all of the South China Sea, but trying to develop an offshore gas field could trigger more repercussions over ownership of the resources.

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Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.