China’s offshore player CNOOC Ltd. (CEO) and Altona Energy plc, an Australia-based energy company, signed an agreement to form a joint venture (JV) for operations in the Arckaringa basin of South Australia. The JV will focus on the commercialization of the world class energy bank in the basin.
As per the terms of the agreement, CNOOC will act as the operator with a 51% working interest and provide funds for the feasibility study for a coal mine and an integrated value-added project. Additional projects may also come online. The projects include evaluation of coal development, coal to liquid, synthetic natural gas, power co-generation and other potential clean energy projects.
Arckaringa Basin holds one of the world’s largest untapped coal resources suitable for CTL (coal-to-liquids) fuels and synthetic gas (aka syngas, a fuel produced from coal). In this context, total resources of the basin is more than one fourth of the North Sea’s remaining proved reserves base.
While CNOOC’s oil and gas properties are located in four major production areas in offshore China (Bohai Bay, western South China Sea, eastern South China Sea, and the East China Sea), the company is gaining traction on the international front. It is one of the largest offshore crude oil producers in Indonesia and has significant upstream assets in Africa and Australia.
The company has been creating JVs to build long-term value for shareholders. In March, it formed an Argentine JV with Bridas Energy Holdings Ltd. for a consideration of $3.1 billion. With this Australian JV, we believe that the company will get an opportunity to expand in that country and build an asset portfolio that has significant production growth potential. Our long-term recommendation for CNOOC remains Outperform at this stage.
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