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Canada's Ivanhoe to explore gas in Sichuan
2002/09/20

A Canadian company, Ivanhoe Energy sealed a 30-year deal with PetroChina to tap into China's largest gas producing region in Sichuan, media report.

Under the deal, Ivanhoe's subsidiaries Sunwing Energy Ltd and Pan China Resources will take about 80 percent of the revenues to develop the 364,000 hectares area until costs are recovered and 45 percent after that, Reuters reported on September 19.

The Canadian company will also shoulder all exploration risks. PetroChina, which is the country's largest oil and gas producer, will take a 51 percent stake in any fields that are discovered, China Daily reported.

According to Ivanhoe, the Zitong base in Sichuan province, where the companies will explore, has a gross natural gas resource potential of five trillion cubic feet, Canadian News Wire (CNW) wrote.

Sichuan also accounts for 30 percent of the national total of gas consumption, China Daily reported.

"The demand for clean burning natural gas in China is expected to grow dramatically over the next decade. Ivanhoe will be clearly positioned to benefit from this trend," Ivanhoe's Chairman David Martin is quoted in CNW.

Approximately 120 million people live in the Sichuan basin and an existing transportation grid within the Zitong block is connected to many industrial and populated areas, CNW stated. In addition, a major trunk line is also being built to ship gas to users in Eastern China via Wuhan.

"This is the first of two very significant production sharing contracts we expect to sign to exploit natural gas in the Sichuan Basin," a statement by Martin on the Ivanhoe's website said.

The company has the right to negotiate another agreement for the one million acre Yudong Block in neighboring Chongqing municipality, the statement said. The negotiations are expected to begin before the end of next year.

China's oil and gas resources are largely untapped by foreigners and multi-billion dollar supply deals, Reuters reported on September 20.

Officials have been worried over foreign nations or companies endangering China's economy by jeopardizing its fuel supply, according to an article in the Wall Street Journal on July 29.

However, foreign contracts and the investments of domestic oil and gas producers have been growing, as China realizes the need to build its oil reserves and use more natural gas to offset its reliance on dirty oil, Reuters reports on September 20.

In August, China awarded a US$13 billion contract to Australia's LNG Pty. Ltd. to supply gas to a terminal in Guangdong province, Reuters writes.

Earlier this month domestic giant Panva Gas Holdings Ltd., which has exclusive rights to supply gas three cities in central China, obtained a 6 billion Renminbi (US$ 725 million) loan from the Bank of China for more pipelines, Bloomberg reported on September 13. The company plans to invest 10 billion Renminbi on gas projects in the next three to five years.

According to CNW, the Chinese government is looking to convert to a market driven price system for residential and commercial gas-use over the next few years

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