CNOOC reaches deal to buy half of Australian energy company

China National Offshore Oil Corp, the nation's third-largest oil and gas producer, has agreed to buy half of a coal seam gas developer in Australia, its second overseas foray in as many months, to help develop domestic unconventional gas resources.

The state-owned parent of listed CNOOC has moved aggressively in the past year into the development of promising but expensive and difficult to extract oil and gas resources, to help plug the gap between China's growing energy demand and domestic conventional energy supply.

The company signed an agreement yesterday in Beijing to contribute A$50 million (HK$380.7 million) towards the verification of natural gas resources trapped in coal seams and shale rocks in five areas in Galilee Basin, Queensland state.

The project is run by Australian-listed Exoma Energy, which acquired five petroleum exploration permits covering 26,840 square kilometres - about four-fifths the size of Hainan island - in the basin in October 2009.

An Exoma statement said the potential geological resource exceeds 100 trillion cubic feet. How much of it will be economically recoverable will depend on drilling results.

Exoma chairman Brian Barker said the company plans to drill 20 to 25 wells next year and about the same number in 2012. The total exploration budget for the two years is A$50 million.

If the drilling results point to sufficient confidence in the potential reserves, China National and Exoma will form a 50-50 joint venture to invest in the gas' extraction.