Doing Unto Others in Tarim
Five thousand years ago, the Chinese philosopher Confucius advised against imposing on others what you yourself do not desire. Today, it looks as if CNPC, China’s largest oil and gas company, is doing exactly that.
In July, CNPC offered foreign companies nine blocks in the desert basin of Tarim (in the Xinjiang Autonomous Region) for high-risk exploration. Five of these blocks, covering 72,729 square kilometers in northwestern China, had been offered in 1993 in Tarim’s first international tender.

As a result of that first tender, 12 foreign companies, including BP, picked up three blocks, which they abandoned after drilling a few dry holes. Independently, CNPC did some seismic work and drilled one self-financed wildcat in those blocks, but failed to strike discoveries of any significance.

The re-tendering of the blocks raised complaints from foreign players that CNPC only offers blocks with very limited hydrocarbon prospects. Beijing-based foreign oil companies have been lukewarm to CNPC’s latest offer, wising up from the previous experience.

BP, Shell, and ExxonMobil are unlikely to take the risk the second time, and small independents lack the financial capability to drill there. Drilling at Tarim is an expensive exercise, as the wells are extra deep (with average depth of 5,000 meters), and drilling in the vast desert costs more due to requisite additional logistic support.

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