Brightoil Petroleum, CNPC Chuanquing Drilling to develop Tuzi natural gas field

Source: Brightoil Petroleum

Brightoil Petroleum’s subsidiary Win Business Petroleum Group has entered into a Tarim Basin Tuzi Pad Development and Construction Framework Agreement with CNPC Chuanqing Drilling Engineering Co., Ltd. (CCDC) for the development and construction of infrastructure of its first upstream asset - Tuzi natural gas field.

According to the framework agreement, the Group has to pay a total consideration of approximately RMB 1 billion (approximately HK$1.188 billion). Subsequent to the agreement, the Group and CCDC will sign formal contracts within 15 working days, and the Group is required to make an upfront payment of 30% of the total consideration within 22 working days upon receipt of the business tax invoice from CCDC after signing of the formal contracts, whilst the remaining balance will be payable by installments over the construction period. The Group plans to finance the development by internal resources and bank facilities. The expenditure will cover the cost of full development of the field, including drilling of up to 14 new wells, the construction of all necessary roads and bridges, drilling pads and pipelines, gas production and gathering facilities, as well as connecting the gas field to the gathering facilities. Once fully completed, the gas facility can reach a daily production capacity up to 3,600,000 cubic meters.

Commenting on the development, Dr. Sit Kwong Lam, Chairman and CEO of the Group, said, “the Tuzi gas field is our first upstream project, commencement of development not only marks an important milestone to the Group, but also proves our determination to become one of the leading global energy conglomerates.”

Dr. Sit added, “The Tuzi project is targeted to commence production by the end of this year, and will enhance Brightoil’s credentials as we explore opportunities globally so that we can accelerate the pace of expansion of our upstream business.”

The Group entered into a Production Sharing Contract (“PSC”) with China National Petroleum Corporation in August 2009. Under the terms of PSC, both parties are able to recover their past investments, before sharing revenue from remaining gas balance on a proportion of 49% to the Group.

Technical studies for the Overall Development Plan (“ODP”) for the Tuzi natural gas project were initiated in January 2010 and a first draft was completed by the end of December 2010. Subsequently, the ODP has been submitted to relevant government bodies for review and approval, however, the approval process takes time. Whilst this process is ongoing, the Group is exploring avenues to accelerate development activities at Tuzi such that the Group can reach its target production date. With the ODP completed, the Group now has a clear understanding of the Tuzi project and the positive impact it will have on the Group’s business.

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