February 2, 2004
Company hopes for pipeline into northern China
A Mongolian oilfield first discovered in the early 1990s has
proven far more promising than originally believed, prompting
calls for a pipeline linking it to northern China, RFA’s
Mandarin service reports.
The UK-based Soco International oil company said it had drilled
four exploration wells in the Zuunbayan field, at the
northeastern tip of Mongolia, during 2003. It said it had found
significant reserves of a higher quality and greater
predictability than was previously known in the area.
"We've discovered oil in a much better reservoir, at a shallower
depth than the previous wells and one which we think we'll be
able to predict with much greater certainty where to drill in
the future," Soco International's president and chief executive
Ed Story said in an interview.
"The key in what we've been about is to get enough quantity,
proven reserves, to then go forward to build a pipeline so you
can move larger quantities to sell to China," Story said, adding
that Soco and its Chinese and Vietnamese partners had long had
an eye on the China market.
China is facing skyrocketing oil bills as a result of strong
economic growth, overtaking Japan in 2003 to become the world's
second-largest oil importer. So far, its attempts to negotiate
pipeline deals with major producers like Russia and Kazakhstan
have not yielded fruit.
Wang Baoji, a Chinese representative at the project for the
Huabei Petroleum Management Bureau, agreed that the oilfield was
a significant find. "We've been cooperating with Soco since
1989," he told RFA. "As for production, it's been coming
onstream fairly fast now. It's not bad... particularly Area 19
[in the Tamtsag Basin area]." He said the project had also
promoted cooperation between China and Mongolia.
Huabei currently holds a 10 percent stake in the venture, with
PetroVietnam holding 5 percent, and Soco 85 percent. The
oilfield currently exports around 500 barrels daily by truck to
Story said Soco had chosen to work with Huabei—which provides
drilling services—partly because of their previous experience
drilling in a similar deposit in China, and partly for economic
"We use Chinese rigs and Chinese personnel who've come over
actually from the Huabei area, and that's the key, so we've got
the costs down," he said, adding that Soco was probably the
first oil company even to use Chinese drilling rigs outside
Those savings meant that Soco could afford to drill more wells
in any given year, with a potential to export as much as 10,000
barrels per day if a pipeline were built. He said that now that
the potential of the Mongolian oilfield was known, a pipeline
would stand a good chance of attracting development funding.
"From the standpoint of China... it would be the closest source
of additional oil reserves, although not on the scale of those
in Russia, but certainly it could become significant, it could
be very secure, and really support a trading relationship
between China and Mongolia," Story said.
China's oil imports soared
far above official forecasts last year, prompting concerns that
the energy deficit could damage the country's economy. Crude oil
imports rose by 31 percent in 2003 to more than 91 million tons,
compared with the previous year. And the overall bill for
foreign oil rose by 55 percent year-on-year to almost U.S.$20