Yacheng 13-1 Gas Project

Abstract

Abstract In 1982 the Peoples' Republic of china awarded ARCO china Inc. the first-ever concession for offshore oil exploration by a foreign company. This historic event led to discovery of the 3 TCF Yacheng 13–1 gas field by ARCO China Inc. in 1983. This paper describes the US$1.1 25 billion Yacheng 13–1 Gas Project that will start-up in late 1995, some 12% years after field discovery. Introduction ARCO's interest in the Peoples' Republic of China began with CEO R. O. Anderson's visit to Beijing in 1978, long before most companies had considered oil and gas exploration in the PRC. In the four years following Mr. Anderson's visit an area of interest was identified, geophysical contracts signed and seismic work undertaken in the South China Sea. The 1982 exploration agreement with ARCO China and its partner, Santa Fe Minerals, was the first signed by the Peoples' Republic of China with any foreign company. ARCO China was designated as operator for the group composed of ARCO China, Santa Fe Minerals (later Kuwait Foreign Petroleum Exploration Company, KUFPEC) and China National Offshore Oil Corporation, CNOOC. The initial concession agreement provided for exploration of a 9,000 km2 area known as the Ying Ge Hai Basin, an area south of Hainan Island in the South China Sea. In July 1983, the Yacheng 13–1 gas field was discovered with the drilling and successful testing of the Yacheng 13–1–1 well. However, the original exploration agreement signed in 1982 was for oil exploration, not gas, so negotiations for an amendment to the original contract began with CNOOC in late 1983. Confirmation of the Yacheng 13–1 field as a world class gas reservoir came with testing of the Yacheng 13–1–2 well in August 1984. After drilling additional dry or non-commercial wells in the concession area, a portion of the block was relinquished in 1985, resulting in the final development area shown in Figure 1. In September 1985 a Supplemental Agreement was executed with CNOOC, this contract beginning efforts to commercialize the large 3 TCF gas reservoir. Development studies undertaken in 1986 focused on marketing the gas and condensate to Hainan Island and Guangdong province in southern China. However, this market failed to develop, and the last half of the 1980's saw little progress in the effort to monetize this large reservoir. During this period, however, ARCO China and its partners continued to pursue alternate markets. P. 271