China National Offshore Oil Corp. (CEO), or Cnooc, is partnering with Iceland's Eykon Energy in an application for a license to explore and produce oil and gas in Arctic waters offshore Iceland, the country's hydrocarbon licensing manager told Dow Jones Newswires Wednesday.
China National Offshore Oil Corp. (CEO), or Cnooc, is partnering with
Iceland
's
Eykon Energy in an application for a license to explore and produce oil and gas
in Arctic waters offshore
Iceland
, the
country's hydrocarbon licensing manager told Dow Jones Newswires Wednesday.
If the application is successful and a license is awarded, it would mark the
Chinese company's first foray into offshore Arctic oil drilling, a new area the
industry's biggest players are scrambling to enter in efforts to replenish
reserves, but which has become increasingly controversial.
While believed to hold vast petroleum reserves, green groups are opposed to
drilling in the pristine Arctic environment and investors are concerned about
the risks and potential costs to a company in the event of an accident.
Cnooc said in an emailed statement that the government of
Iceland
and
Eykon Energy have invited Cnooc to take part in its offshore oil and gas
exploration activity and the project is currently under negotiation.
Chinese oil companies have long been seeking an offshore Arctic oil deal as
part of
Beijing
's
efforts to secure supplies for the energy hungry nation. Earlier this year,
Cnooc and other Chinese oil companies held talks with Igor Sechin, the head of
Russia
's
state-controlled OAO Rosneft (ROSN.RS), during his visit to
China
about
potential offshore projects in the Russian Arctic.
In April,
Iceland
and
China
signed the first free trade pact between
Beijing
and a
European country soon after a visit to
Iceland
by
former premier Wen Jiabao. In May, following intensive lobbying, China became
an observer on the Arctic Council, a body whose members hope to shape growing
prospects for resource development and trade, underscoring the country's
interest in the Arctic region.
Cnooc's participation in the project would also mark the first entry of a major
oil company into
Iceland
's
nascent oil sector. Earlier this year, it awarded two licenses from its first
successful round for acreage in the Dreki area, northeast of
Iceland
and
neighboring coastal waters in oil producing
Norway
.
Eykon Energy applied for a license in the tender round, but was unable to move
forward without a partner, said Thorarinn Sveinn Arnarson, hydrocarbon
licensing manager at
Iceland
's
National Energy Authority.
"Now we can evaluate the technical merits of the application and the
qualifications of the companies, both technical and financial, before we make
our decision," he said.
If the companies qualify, the license would be awarded in the autumn, he said. The
size of Eykon's and Cnooc's stakes in the partnership and the exact location of
the offshore Arctic license area would be announced then, he added.
Big oil companies are keen to tap some of the 90 billion barrels of oil the
U.S. Geological Survey estimates the entire Arctic region may hold, but
progress has been slow and exploration is still at a very early stage.
Earlier this year, Royal Dutch Shell PLC (RSDA.LN), which has spent over $5
billion on its
Arctic
drilling program offshore
Alaska
, said
it would pause its campaign following bad weather, mechanical failures and
regulatory challenges.
Shell's Arctic oil drilling experience is viewed as critical for other
companies seeking to drill and highlights the huge risks, costs and challenges
involved.
ConocoPhillips (COP) is set to drill in the Alaskan Arctic next year. Elsewhere,
Exxon Mobil Corp. (XOM),
Italy
's Eni
SpA (E, ENI.MI) and
Norway
's
Statoil ASA (STO, STL.OS) have partnership agreements with Rosneft to develop
Arctic blocks. BP PLC is close to securing a long-coveted Arctic oil deal in
Russia
.
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