CNOOC, Zheijian sign LS 36-1 gas sale frame agreement

China National Offshore Oil Corp. (CNOOC) has signed a framework agreement for the sale and purchase of natural gas to Zhejiang Natural Gas Development Co. (Zhejiang Gas) from the LS 36-1 gas field in the South China Sea.

Offshore staff

LONDON -- China National Offshore Oil Corp. (CNOOC) has signed a framework agreement for the sale and purchase of natural gas to Zhejiang Natural Gas Development Co. (Zhejiang Gas) from the LS 36-1 gas field in the South China Sea.

Previously, the two parties agreed in principle defining the general terms on which Zhejiang Gas would purchase future gas produced from LS 36-1. This included the quality of the gas, take-or-pay principles, base price, annual quantity, and delivery schedule.

Over the past year, while London-based Primeline Energy Holdings and CNOOC were preparing the field’s Overall Development Program, negotiations continued over detailed terms of the gas sale for incorporation into the more formal framework agreement.

Primeline says the commercial terms are broadly the same as in the Agreement in Principle. However, the framework agreement contains various terms, including the delivery point, delivery planning and schedule, determination of final delivery gas price, and payment terms, which had not previously been confirmed.

However, the new agreement will be sufficient to gain approval from China’s government, and also project financing.

During development of the production facility, once further supply and production details have been confirmed, CNOOC and Primeline will negotiate further details of the gas sale, with the framework agreement likely to be replaced by a final gas sale contract.

For the time being, Primeline is continuing its post-well evaluation work following completion of the LS 35-3-1 discovery well.

07/21/2010

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