CPC signs cross-strait oil deal

Chinese Petroleum Corp (中油) and its Chinese counterpart signed a landmark pact yesterday to jointly explore for oil in one of the boldest moves to tear down obstacles to bilateral trade and investment.

CPC and China National Offshore Oil Corp (CNOOC, 中國海洋石油) plan to invest a total of US$25 million over four years to hunt for oil, sidestepping a political stalemate between Taipei and Beijing.

The agreement paves the way for both state firms to jointly develop the Chaoshan block in the open seas about 140km from the southern port city Kaohsiung.

"As far as I know it's the first large-scale cooperation between two state-owned enterprises across the strait," said CNOOC President Wei Liucheng (衛留成) following the signing.

The agreement was the second major commercial deal involving state-controlled companies. China Eastern Airlines signed a pact last year to sell a 25 percent stake in its cargo unit to Taiwan's China Airlines Co (華航), in which a government-run fund has a controlling stake.

CNOOC, parent of listed CNOOC Ltd, has received Beijing's approval for the project, which calls for the establishment of a 50-50 joint venture.

Chinese Petroleum and CNOOC had conducted a geophysical survey of the 15,400km2 block in 1996 and found the area likely to have oil and gas. Whether the block contains any natural gas or oil requires actual exploration.

"The signing of the oil deal means our cooperation on oil exploration has moved from joint study to joint investment. In the next stage, we will move from joint investment to joint development," Chinese Petroleum Chairman Regis Chen (陳朝威) said at the ceremony.

The Mainland Affairs Council had dragged its feet on approving the deal but gave the green light last month.

Chinese Petroleum was reluctant to play up the signing ceremony, apparently worried that cooperation in the strategic energy sector would send the wrong signals to Taiwanese businessmen pressing the government to further ease curbs on mainland-bound investments.

"The two sides had hoped for a breakthrough on the economic fronts, but issues such as ideology, titles, and `one China' always stood in the way," said Chen Ming-chang (陳明璋), a former China policymaker who teaches cross-strait trade at National Taipei University.

"Speaking purely from the business point of view made things a lot easier," Chen said, adding that economic integration would improve the political climate.

Chinese Petroleum and CNOOC officials avoided politics at the signing ceremony, stressing the deal was "equal and mutually beneficial."

"A deal of such significance can't go ahead unless authorities on the two sides agree," CNOOC's Wei said.

"We share the same culture, the same language and the same work habits. I think the cooperation will be pleasant and smooth."

Fence-mending talks between Taipei and Beijing have deadlocked since July 1999, when then president Lee Teng-hui (李登輝) redefined bilateral relations as "special state to state" in an attempt to break Taiwan out of diplomatic isolation.

Mounting pressure from Tai-wan's private sector forced the government to ease last month a ban on microchip makers building plants in China. But tough conditions were attached.

Chinese Petroleum has been aggressively exploring investment opportunities to cope with rising competition since 2000, when the government allowed a private company to enter the country's oil market, ending the oil giant's decades-old monopoly.