Horizon Oil is to conduct technical studies, including geological review, seismic reprocessing and interpretation, over the 3,845 sq km South China Sea block. At the end of the study Horizon Oil will have the option to proceed to further seismic acquisition, exploratory drilling and development work.

The terms and conditions of the petroleum contract provide for CNOOC to participate at up to 51% in any development project providing it funds its share of development costs. The contract also provides for produced oil to be sold at world market prices.

The area is covered by 2,800 km of variable quality regional 2D seismic data that will be made available to Horizon Oil. But no wells have been drilled within the permit and it remains untested for hydrocarbon potential. Water depths are 20-60 metres, so drilling operations can be carried out with the same jack-up rigs that are used in the Beibu Gulf Basin and development work should be straightforward, according to Horizon.

The Lei Dong sags are considered to be very similar the complex of five sags that make up the Beibu Gulf Basin and to the Maoming sag located onshore, 80 km to the north. In the Beibu Gulf four of the five sags have been proven to contain working hydrocarbon systems. The Maoming sag onshore China is mined for oil shale that is processed to petroleum products.

“The opportunity has tremendous scope and potential,” said Horizon CEO Brent Emmett said.

“We believe we have been able to adequately analyse the technical and commercial risks and they are acceptable. The ability to gain entry with relatively low cost geological and geophysical work before we have to commit to expensive 3D seismic and drilling is particularly favourable.”