Under the farmin deal, Husky will drill one wildcat up to a depth of 2,500 metres and will entirely fund the exploration costs. In return, CNOOC's subsidiary, CNOOC Ltd, will be allowed to participate up to 51% interest in any commercial discoveries located within the contract area.

CNOOC and Husky have had six previous agreements on other projects but this is the first contract that CNOOC Ltd and Husky have signed for an East China Sea block - an area of unexplored potential.

According to CNOOC Ltd Senior Vice President, Zhang Guohua, "The East China Sea is under-explored currently. The Company and our partners will take efforts to tap oil and gas potential in this area."

Block 04/35 is located 350 km east of Shanghai and covers a total area of 4835 square km.