I'm always interested when big oil firms decide to exit a play. Because it often signals that an opportunity is at hand for smaller firms.
That could well be the case in the Chinese offshore this month. Where major player Anadarko Petroleum has decided to move along from a package of prospective acreage.
The major said last week it will sell its licenses in Bohai Bay for $1.08 billion. The buyer being Hong Kong-listed Brightoil Petroleum.
The Bohai package isn't large by any means. Consisting of 32,000 barrels per day of oil production. But the more interesting aspect of this play is what it could become--based on recent results from other similar basins globally.
That's because Bohai is one of the few places where unconventional drilling has been used to revamp aged oil fields. Producing substantial increases in production and reserves through techniques like directional well boring.
Such strategies have been shown to be extremely accretive to value in places like the U.S. Gulf of Mexico. Where horizontal drilling has recently been creating millions of barrels in new reserves--and billions of dollars in value.
These results indicate that Bohai could be exactly the kind of place where a junior like Brightoil can win big value. The reserve adds created by new drilling development likely wouldn't be material to a major like Anadarko. But for a smaller firm, finding new oil here through improved recoveries would certainly be substantial.
This may thus be one more example of a play that's worth more in the hands of a junior company. Such projects are increasingly becoming common in the shallow offshore environment--where low-cost drilling and high-impact results are adding significant value for firms willing to take them on.
Here's to creating something new from something old,
By Dave Forest