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Chesapeake strikes $1.2 billion development deal with Chinese company

Chesapeake on Sunday announced a $1.2 billion joint venture agreement with CNOOC International Ltd., a subsidiary of one of China's largest independent oil companies.
BY JAY F. MARKS Modified: January 31, 2011 at 6:17 am •  Published: January 31, 2011

Chesapeake currently is operating 16 producing wells in the Denver-Julesburg and Powder River basins. Those wells have reached initial production rates of up to 1,000 barrels of oil and 3 million cubic feet of natural gas per day.

There are five operated rigs in the area now, but Chesapeake expects to increase its drilling activities to about 10 rigs by the end of the year due to CNOOC International's investment. The company expects to have 20 rigs running by the end of 2012.

As part of the deal, CNOOC International will have the option to purchase a one-third share of any additional acreage Chesapeake acquires in the area.

The company also will be able to participate with Chesapeake in midstream infrastructure related to production generated by those assets.

CNOOC Ltd., Chairman Fu Chengyu said he was pleased to strike another deal with Chesapeake.

“The project highlights the joint interests of energy companies in both the U.S. and China to accelerate the development of shale oil and gas, increase energy supply and reduce greenhouse gas emissions,” he said.

“We believe this project is meant to be mutually beneficial to both parties as well as for both Sino-U.S. energy industries.”