The two offshore oil and gas PSCs with CNOOC are for blocks 62/02 and 62/17 in the Yinggehai Basin. Shell, as operator, will apply advanced seismic acquisition and processing technologies to conduct 3D seismic data surveys in the Yinggehai blocks. Shell will cover the costs for the acquisition of seismic data and will use advanced drilling technologies to drill exploration wells during the exploration phase. Shell will hold a 100% working interest during the exploration phase, that will be reduced to 49% in any eventual development phase, with CNOOC as majority partner.

The onshore tight gas PSC amendment with CNPC represents a new phase for the development of the existing Changbei block with 1,692.5 square kilometers in the Ordos Basin, and adds scope to develop additional tight gas sands and further develop the already producing main reservoir. Subject to government approval and pending the outcome of the appraisal campaign, this additional development project could increase the current production plateau of 320mmscf/d. Shell will continue to be the operator at Changbei.

In Gabon, CNOOC will acquire a 25% participating interest in offshore exploration blocks BC9 and BCD10. CNOOC will reimburse Shell for 25% of certain past exploration costs and carry part of the future exploration costs. Shell will remain operator with 75% interest. The agreement is subject to government approval.

We are delighted about the return to offshore exploration in China and the opportunity to work with CNOOC again on a major project in the country. We are equally delighted to continue and expand the Changbei success story in partnership with CNPC. Moreover, we are very pleased to have entered the farm-out agreement with CNOOC in Gabon. These new projects in partnership with Chinese companies are the latest showcase of our China strategy to work with our Chinese counterparts both in China and globally to help meet the country’s energy needs to fuel its fast growing economy.

—Lim Haw-Kuang, Executive Chairman of Shell Companies in China

In China, Shell operates the onshore Changbei tight-gas field under a PSC with PetroChina. The two parties have also agreed to appraise, develop and produce tight gas in the Jinqiu block in the central Sichuan province under a 30-year PSC (Shell interest 49%), which expires in 2040. The Jinqiu project achieved first gas production in September 2011. Also in Sichuan, Shell and PetroChina are assessing shale gas opportunities in the Fushun-Yongchuan block. The two parties are also assessing opportunities in coalbed methane in the Ordos Basin, where Shell has an agreement to evaluate resources in North Shilou. Shell is also a partner in the Hangzhou city ring joint venture that develops, operates and manages a high-pressure natural gas pipeline system.