China National Offshore Oil Corporation (CNOOC), the parent company of CNOOC Limited, has signed a production sharing contract with London AIM-listed Empyrean Energy for Block 29/11 in the South China Sea.
Located in Pearl River Mouth Basin of the South China Sea, the Block 29/11 covers a total area of 1,808km² with a water depth of 300m-600m. The implementation of the production sharing contract will commence from 13 December.
Pursuant to the production sharing contract, Empyrean will serve as the operator during the exploration period and carry out exploration in 29/11 block. All expenditures incurred for the exploration will be borne by Empyrean.
The first phase of the contract is valid for a period of two-and-a-half years with a commitment to drill one exploration well to a depth of 2,500m or to the basement formation.
Empyrean has a 100% working interest as per the agreement. Upon a commercial discovery, CNOOC has the right to participate in up to 51% of the participating interest in any commercial discoveries of the block.
Commenting on the agreement, Empyrean Energy CEO Tom Kelly said: “Entering into the production sharing contract marks an important milestone for the company with regards Block 29/11. Tenure is now secured on Block 29/11 for 2.5 years.
“We are looking forward to drilling one of the exciting, potentially company transformational prospects that we have identified via the recently acquired 3D seismic.
“Alternatives for drilling our first well on Block 29/11 within the 2.5 year time frame are open, with farm-out, sale of an asset or alternative fundraising all being considered.”
CNOOC has assigned all of its rights and obligations under the contract to CNOOC China Limited, a subsidiary of CNOOC Limited, excluding those related to CNOOC’s administrative functions.
EME can exercise the option of entering the second phase after surrendering 25% of the current area. The second phase covers a commitment of drilling one extra exploration well to a depth of 2,500m or to the basement formation within a further two-year period.