China National Offshore Oil Corp (CNOOC) said it signed two production sharing contracts with Britain's BG Group PLC covering two deep water blocks in the South China Sea.

An employee of China National Oil Offshore Company (CNOOC) looks at the company's logo during a press briefing at a hotel in Hong Kong, January 2006. CNOOC said it signed two production sharing contracts with Britain's BG Group PLC covering two deep water blocks in the South China Sea. [AFP]

BG Group will operate and retain a 100 percent interest during the exploration phase under the terms of the contracts, CNOOC said in a statement.

In the event of an oil discovery, CNOOC has an option to take an interest of up to 51 percent in that field, it said.

"We welcome BG's decision to join us in exploring the deep water potential offshore China," said Fu Chengwu chairman and CEO of CNOOC.

"I expect a successful partnership, which would bring value to both companies."

A geophysical survey agreement was also reached on a separate block, with BG set to have an exclusive option to enter production of the block after survey work is completed.

The two blocks are located in the Qiong Dong Nan basin of the South China Sea, while the geophysical survey block is near the mouth of the Pearl River, the statement said.

The agreements are subject to final government approval.

The deal was the first between CNOOC and BG in offshore cooperation, it said. CNOOC has signed four deep water contracts with other foreign partners.

(For more biz stories, please visit Industry Updates)