With its Chinese counterpart PetroChina, France-based global energy giant Total is right on track studying the feasibility of and preparing for the development of the South Sulige Block in Ordos Basin, sources from the multinational revealed recently.

"Total participates in the development of gas resources in China. An active production sharing contract is in progress with PetroChina on the high-profile South Sulige Gas Field," a spokesperson from the French oil and gas producer told China Daily.

Besides the South Sulige project, "several other onshore and offshore opportunities are also under evaluation," according to Total's China business agenda. The French energy powerhouse did not elaborate on more potential programmes.

Total and PetroChina Co Ltd, on behalf of China National Petroleum Corporation, signed on March 2 this year a production sharing contract (PSC) for the evaluation, development and production of the natural gas resources of the South Sulige block. The contract became effective on May 1, 2006. The block covers an area of around 2,390 square kilometres located in the Inner Mongolia Autonomous Region. It is part of the Ordos Basin, one of the most resource-rich in China.

A memorandum of understanding (MOU) on natural gas sales and purchase agreements was also signed on the same day. The signing of the contract and the MOU has further strengthened the strategic partnership between PetroChina and Total. Through co-operation, Total and PetroChina look forward to leveraging on their respective competitive edges to accelerate the development of the natural gas reserves in South Sulige and start commercial production at the earliest date.

As a wholly owned subsidiary of Total, Total E&P China (TEPC) was established in July 2006 for the implementation of the Sulige South Project and other future projects in China. TEPC will be the operator of the project.

According to Total, the mission of TEPC is to "develop hydrocarbon resources in a safe, efficient, responsible and environmentally friendly way and contribute to the sustainable development in China and to long-term co-operation between Total and Chinese companies".

As one of the oil giants in the world, Total has been playing a leading role in oil and gas exploration and production around the world. PetroChina is the largest producer and supplier of crude oil and natural gas in China, assuming strategic responsibilities in the market.

During recent years, Total has been actively participating in onshore oil and gas exploration activities in China. In 2002, PetroChina teamed up with Total to commence a joint study on the natural gas reserves in the South Sulige block. Based on the joint study and through open and friendly negotiations, agreement was reached on the evaluation of the permit and joint development and production of natural gas from the block.

Total and PetroChina will form joint teams, mixing staff from both companies. Total will have a leading role in the first phase, which is due to last until late 2008. The working programme will include acquiring and interpreting new seismic, re-entering existing wells, and drilling new ones, in order to decide on a full field development at the end of this first period. As soon as they are formed, the teams will start working simultaneously in Beijing, and Xi'an and Jingbian in Shaanxi Province.

The PSC is a major agreement since there looks to be a huge volume of gas involved and the low permeability of the reservoirs represents a real technological challenge. Total has been asked to clear up the uncertainty surrounding well productivity and optimum well locations before a decision is made as to whether to start field development in 2008.

The development project plans to drill more than 400 wells and build a number of treatment and compression installations. The field is expected to come on stream in 2011 and should produce up to 4 billion cubic metres per year over a period of 20 years. The gas will be delivered to PetroChina, which will then supply the consumer markets, mainly Beijing.

Total is a leading multinational energy company with 95,000 employees and operations in more than 130 countries. Together with its subsidiaries and affiliates, Total is the fourth largest publicly traded integrated oil and gas company in the world. Its businesses cover the entire oil and gas chain, from crude oil and natural gas exploration and production to the gas downstream (including power generation), transportation, refining, petroleum product marketing, and international crude oil and product trading. Total is also a world-class chemicals manufacturer.

(China Daily 10/25/2006 page21)