CNPC farms in E. Kalimantan gas block

Hong Kong Exchange-listed oil firm CNPC (Hong Kong) Limited, a subsidiary of Chinese oil firm CNPC announced on Tuesday that it had signed a letter of intent to farm in Bengara II PSC gas block in East Kalimantan on July7, 2006.

Under the deal, CNPC will buy 70 percent shares of Continental-GeoPetro (Bengara II) Ltd, the operator of Bengara II from Continental Energy Corporation and GeoPetro Resources Company. After completion of acquisition, Continental Energy's stake in the PSC will be reduced to 18% from 60%, while GeoPetro's share will drop to 12% from 40%.

CNPC will advance the project's exploration costs by providing a shareholders loan of US$18.7 million to the joint venture company. If reserves of a commercially viable size are found by the end of 2007, CNPC (Hong Kong) will further advance a shareholders loan of up to US$41.3 million to the joint venture for development and production.

Continental-GeoPetro (Bengara II) signed Bengara II PSC contract in 1997 for up to 30 years.

The Bengara II PSC has the Makapan field, which was discovered in 1988. The discovery well tested an accumulated flow of more than 19.6 million cubic feet of gas per day plus 600 barrels of 54 degree API condensate from a 33 feet thick sandstone section near 6,000 feet. Several other gas zones indicated on logs were not tested. The Makapan Field lies mostly offshore in very shallow water, less than 10 feet, amidst numerous islands of the Bulungan River delta. (alex)