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It marks the first time for CNOOC to tap the wealth of oil reserves 300 metres below the water surface.
The oilfield, named 40/30, covers a massive area of about 6,700 square kilometres in the Pearl River Basin, 110 kilometres southeast of Hainan Island.
Husky will bear all the risks and expenditure of the seven year exploration period. If any commercially viable discoveries are made, CNOOC retains the option to drill up to a 51 per cent working interest, according to a statement issued by CNOOC yesterday.
The Canadian oil company is committed to investing at least US$10 million to drill one wildcat 1600 metres in depth during the initial exploration phase, the statement continued.
"The contract marks the first time for CNOOC to wade into deep water, which is a global trend in the oil industry," said Zhou Shouwei, president of CNOOC, at yesterday's signing ceremony in Beijing. "It is also a strategy for us to expand the output."
CNOOC is working hard, some analysts say aggressively, to increase its oil and gas reserves and production, a fact demonstrated by its acquisition of stakes in overseas oil and gas fields. The company's target is to boost its production by 15 per cent annually over the next few years, CNOOC said.
Yesterday's contract is the fifth between CNOOC and Husky. The two companies have already been pumping oil in the Wenchang 13-1/2 field in the South China Sea since July, which is yielding a daily production of 60,000 barrels.
John C.S. Lau, president of Husky Energy, the parent company of Husky Oil China, said it plans to invest US$321.0 million in China in the next five years, including the investment in the existing contracts.
"We are making China the core area for our business development in the future," said Lau at the ceremony.
He added: "We will reinvest what we earned from Wenchang in our development in China."
Husky is also the first foreign company to reach an agreement with CNOOC on deep water exploration.
