Kufpec China Blocks

Kufpec this week announced new production sharing contracts (PSCs) for three exploration blocks in the South China Sea.

The Kuwaiti state firm – the overseas upstream arm of KPC – says it will have a 30% working interest in the development of any future discovery at the blocks operated by China’s CNOOC, which will retain a 70% operator’s stake.

In an unusually-structured deal, despite its minority working interest Kufpec will bear 80% of exploration spending.

The three blocks are in relatively shallow water: Block 52/22 covers 1,900km², Block 52/26 1800km² and Block 63/13 about 700km².

The deal is a departure from the contract terms used in Kufpec’s other PSC with CNOOC. Kufpec has been active in the South China Sea at the Yacheng 13-1 gas field since 1988. Production began in 1996. In late 2012, the Kuwaiti firm purchased BP’s 34.3% stake for $308mn, bringing its total stake to 49%. CNOOC owns the remaining 51% and operates. The field has been in decline for some time, yielding just 185mn cfd in 2012, down from 240mn cfd in 2011 and 325mn cfd in 2010 (MEES, 17 May 2013). The new blocks are adjacent to the pipeline linking Yacheng to shore.


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