Category Archives: China

The People’s Republic of China (PRC), established in 1949, commonly known as China, has control over mainland China and the largely self-governing territories of Hong Kong (since 1997) and Macau (since 1999).

The Chinese Yuan May Become A World Currency

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By Eliot Elwar
Apr 15, 2012

China seeks to replace the diminishing U.S. dollar as the world reserve and trade currency, and efforts are underway in Beijing to set up the Chinese yuan for global currency.

Global economic analysis shows that China’s yuan inches closer to global currency, dollar tumbles as jobs data disappoints many, dollar falls after fed comments, disappointing Italy bond auction weighs on European stocks, and China’s central bank governor suggests creating super-sovereign reserve currency.

According to Forbes, China’s yuan may be two years away from becoming a global trade currency. By 2014, an economic system may be created to settle cross-border yuan transactions, which could increase currency convertibility in Beijing and elsewhere. When this economic system is developed, it will permit nations to settle expenses with Chinese merchandises or in yuans rather than dollars. Over time, the yuan usage, mainly in Asian trade markets, would take demand away from the dollar along with its status as world’s reserve and trade currency.

According to Business Week, the dollar fell among its major peers as data showed the number of Americans filing for jobless benefits since January, making the argument for monetary policy. Additionally, In China, Australia’s largest trading partner, local- currency-denominated loans were 1.01 trillion yuan ($160.1 billion) in March, the People’s Bank of China. This exceeded all 28 estimates in a Bloomberg News survey, reassuring investors the nation may avoid a deep slowdown.

According to Market Watch, the U.S. dollar declined after a second Federal Reserve official emphasized dangers to U.S. financial development, remaining lower against the euro after Italy managed to trade benchmark three-year bonds and other debt. The Australian dollar performed very well after stronger-than-expected Australian jobs data. The euro grew to $1.3199, from the lower $1.3102 during North American trading. The 17-nation shared currency also advanced on the Japanese yen up 0.3% to ¥106.58.

According to Xinhua, Zhou Xiaochuan, China’s central bank governor, has propositioned to make a super-sovereign backup currency to support the international monetary system reform. He said the international monetary system seeks to fashion an international reserve exchange that is disengaged from distinct nations with ability to remain unwavering in overtime, thus eliminating the characteristic insufficiencies produced by operating credit-based national currencies.

Finally, although a super sovereign currency is not currently on the horizon, China still has high objectives for the yuan. China’s ability to internationalize the yuan would give it another way to inflict damage on the US economy and begin gradually replacing the shaky U.S. dollar with the Chinese yuan.

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Shadow Banks on Trial as China’s Rich Sister Faces Death

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By Bloomberg News – Apr 11, 2012 2:24 AM CT

When a Chinese court sentenced 28- year-old Wu Ying, known as “Rich Sister,” to death for taking $55.7 million from investors without paying them back, it sparked an unexpected firestorm that has drawn in China’s top leadership.

Her crime involved a common, illegal practice in China: raising money from the public with promises to pay back high interest rates. Known as shadow banking, these underground lending and investing networks are estimated to total $1.3 trillion, according to Ren Xianfang, an economist with IHS Global Insight Ltd. (IHS) in Beijing. That’s the size of the 2011 U.S. government deficit.

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Chinese businesswoman Wu Ying who was accused of illegally raising funds and defrauding investors weeps during a trial at the Intermediate Peoples Court of Jinhua in Jinhua city, east Chinas Zhejiang province, 16 April 2009. Photograph: Imaginechina via AP Images

Operating outside the banking system or government regulation, the informal networks provide an important source of economic growth, capital for private companies and return for investors seeking to beat inflation. Premier Wen Jiabao, in an unusual move, weighed in on the Wu case at a March 14 news conference. His comments highlighted a public debate over the importance of shadow banking to the Chinese economy, government efforts to bring it under control — and whether capital punishment is an effective means to do so.

“Chinese companies, especially small ones, need access to funds,” Wen said when asked about Wu’s case. “Banks have yet to be able to meet those companies’ needs, and there is a massive amount of idle private capital. We need to bring private finance out into the open.”

Unfairly Singled Out

Wu’s lawyer says his client, now 30, was unfairly singled out and is no different from the estimated 42 million Chinese business owners who rely on the shadow-banking system for financing when they cannot get loans from state-owned banks. The Supreme People’s Court is reviewing the 2009 verdict and will decide as early as this month whether Wu Ying lives or dies.

“Entrepreneurs are paying attention to it because today’s Wu Ying could be any of them tomorrow,” the lawyer, Yang Zhaodong, said in an interview in Beijing last month. “There are so many of them doing the same thing Wu Ying did. This case not only relates to Wu’s life, but to whether China’s legal and judicial system is fair.”

Shadow banking has been fueled by a two-year credit squeeze in China and by large, state-owned banks’ preference for lending to government-run companies rather than small businesses. Private entrepreneurs account for 60 percent of China’s total economic activity and provide jobs for 80 percent of its urban population, according to China’s National Development and Reform Commission.

Meteoric Rise

“Underground banking filled the hole left by China’s state-owned banks, which have this long-term bias toward big enterprises,” said IHS’s Ren. “Even though it is an extremely opaque market and has a lot of hidden problems, the government needs it to meet the basic financing needs of small businesses.”

Wu’s rise and fall have been meteoric. The daughter of a farmer in Zhejiang province, south of Shanghai, Wu dropped out of technical school as a teenager to work at her aunt’s beauty salon and later opened two of her own, according to the state- run Global Times newspaper. She branched out into a foot-massage parlor and bought 10 cars which she rented out. An entertainment center and a boutique featuring Korean clothes followed, as did investments in real estate and copper, the report said.

Wu collected 770 million yuan ($122 million) from private investors between May 2005 and February 2007, according to government prosecutors. She also accumulated more than 100 properties and 40 cars, including a $500,000 Ferrari, the Global Times said.

Knowing the Risks

Wu borrowed money to fund her businesses and didn’t lie to anyone, her lawyer said. She never committed fraud, Yang said, adding that her investors, like anyone who took part in the private-banking business, knew the risks involved.

“Even her biggest creditor who she owed 320 million yuan doesn’t think Wu was lying to her,” said Yang. “These were real projects.”

The court in Wu’s home province of Zhejiang said she “brought huge losses to the nation and people with her severe crimes and should therefore be severely punished” when it upheld her death sentence in January, according to the Xinhua News Agency.

Nicknamed “Fu Jie,” or “Rich Sister,” in the media, Wu and her case were discussed at the annual legislative session in Beijing in March, where delegates debated the larger issues of shadow banking.

“You cannot try to stop this just by killing people,” Wang Yongzheng, a delegate to China’s People’s Political Consultative Conference and owner of a textile company, told a small group session at the meetings.

‘Public Outrage’

In a country where public criticism of government policy is rarely sanctioned, state-run media outlets such as Xinhua and the People’s Daily, both Communist Party mouthpieces, have run stories, editorials and online chat sessions airing public sympathy for Wu.

On Feb. 8, the China Daily newspaper ran an article noting “public outrage” and the “wide sympathy and pleas for the fair-skinned woman with a short haircut.” It quoted a legal expert as saying the government’s seizure and sell-off of her assets was illegal.

On the Defensive

As the public outcry surrounding Wu’s case began to swell, court officials and police took the rare step of publicly defending their verdict. The presiding judge in her case, Shen Xiaoming, appeared in a Feb. 7 Internet chat to explain that Wu Ying was sentenced to death because the court found she intended to defraud investors.

“This was more than just illegal fundraising,” Shen said in the chat.

China’s entire shadow-banking system is bigger than just underground borrowing and lending, totaling about $2.4 trillion, a third the size of China’s official loan market, according to Societe Generale SA economist Yao Wei. In addition to informal lending, it includes the off-balance-sheet activities of banks, trust companies, and businesses lending to each other, Yao said. The amount is almost the size of U.S. consumer debt, which exceeded $2.5 trillion as of January, according to the U.S. Federal Reserve.

Ordinary Chinese savers also fuel the country’s shadow- banking system. They have few legal options if they want to earn a return that beats inflation, which hit 5.4 percent in 2011. The government sets China’s current ceiling for savings account interest rates at 3.5 percent, a figure that has trailed inflation for two straight years as of January. Wu offered interest rates of as much as 0.5 percent a day to attract investors, according to Xinhua.

Bankruptcies and Suicides

Zhejiang province, where Wu’s home village of Dongyang is located, has been at the heart of private lending activity. Between April and September last year, more than 80 indebted businessmen committed suicide or declared bankruptcy in its boomtown manufacturing city of Wenzhou because they couldn’t repay informal lenders, according to Xinhua.

Bankruptcies and arrests continue to be reported almost daily. Today, the China Securities Journal reported that Hangzhou Glory Real Estate Co., also located in Zhejiang, had filed for bankruptcy after borrowing 2.5 billion yuan from individuals.

Pilot Program

The government has stepped in to deal with the troubles and bring some aspects of shadow banking under government control. In October, Premier Wen traveled to Wenzhou, a city of 9.1 million people 230 miles (370 kilometers) south of Shanghai, pledging help for troubled businesses. Then, on March 28, China’s State Council approved a pilot program for Wenzhou that would ease some restrictions on private lending.

Private capital will be encouraged to participate in “innovative financial organizations” such as credit unions, and banks will be encouraged to lend money to small enterprises, the State Council said.

“The Wenzhou trial program has started us on the right track,” Zhou Dewen, president of the Wenzhou Small and Medium Sized Enterprises Development Association, said by phone the day after the announcement. “The trial program is a step forward toward making private lending a practice that’s legal.”

By the time Wu was in her mid-twenties, she had founded the Bense Holding Group — the name means “original color” — and established 12 companies, according to a profile in the Guangzhou-based Southern Weekly before her arrest.

Drawing Attention

Wu’s success drew the attention of the Chinese media. In its Feb. 1, 2007 profile, the Southern Weekly said she drove to the interview in a BMW and couldn’t explain where her wealth had come from.

“I don’t launder money,” Wu said, according to the newspaper. “My money is clean.”

According to the article, Wu had a tattoo of a rose on her chest and once donated 6.3 million yuan to charity. Less than two weeks after the article was published, authorities announced that Wu had been arrested on suspicion of illegal fundraising.

Prosecutors later upgraded the charges against her to financial fraud, a crime punishable by death in the most severe cases, for losing 380 million yuan of investors’ money. Two years later, she was sentenced to die.

The court found that Wu raised her money by “fabricating facts, deliberately hiding the truth, and promising high returns as an incentive,” according to Xinhua.

Photographs of Wu in court show her sobbing as she stands at the dock, clad in a yellow prison jacket, her tattoo peeking from the neckline. She has been in prison appealing her conviction since her arrest in 2007. Xinhua reported in April 2011 that Wu was writing a book called “Black Swan,” a fictional account of her life, while in prison.

Not the First

Wu wouldn’t be the first shadow banker to be put to death in China. On Aug. 5, 2009, the Supreme Court approved the execution of two female entrepreneurs in separate cases. Si Chaxian, age unreported, was charged with defrauding 300 people of 167 million yuan over five years and promising returns of as much as 108 percent annually, while Du Yimin — who was 44 at the time her death sentence was upheld — was charged with defrauding 709 million yuan by promising to pay as much as 10 percent per month, the official CCTV reported. Both women were from Zhejiang province.

On Death Row

At least 17 people, including Wu, now sit on death row after being sentenced for illegally raising funds from individuals, according to Chinese media reports compiled by Bloomberg since 2009. Seven of them are women.

In the latest case, on April 6, 30-year-old Wang Caiping was sentenced to death for borrowing along with her brother more than 100 million yuan from 15 victims, according to the official Xinhua News Agency. Wang and her brother, who has fled, invested the money in gold and futures speculation and incurred losses, the report said. They had paid out 5.8 million yuan in interest as of the day Wang was arrested, with 94 million yuan unpaid, Xinhua added.

In Zhejiang, sentences handed out for various shadow- banking-related crimes rose to 75 last year, up from eight in 2007, the official Legal Daily reported, citing the provincial high court.

In Shanghai, police said March 29 they had arrested Gu Chunfang, a woman in her early forties who runs a trading company, for racking up 500 million yuan in underground-lending debts, China Daily reported. Her nickname: “Most Beautiful Businesswoman.”

Striking a Chord

Wu’s case, unlike the two executions, 16 other death sentences and numerous arrests, has struck a chord and spurred a broader national debate.

“She’s not some sort of privileged person who just had everything handed to her,” said Sarah Schafer, a Hong Kong- based researcher with Amnesty International. “People see her as someone who is closer to them than they care to admit.”

Amid the demands for change to China’s shadow-banking system, Wu’s case has also been taken up as part of a parallel debate about China’s death penalty.

Groups including Amnesty International that monitor capital punishment say attitudes toward it have begun to change in China — especially in cases of financial fraud. The government has allowed broader public debate on the death penalty, and government officials have talked more often of pushing China toward abolishing the practice, according to Schafer.

Accepting Abolition

“The argument from the Chinese government has always been that the public wouldn’t accept abolishing the death penalty,” Schafer said. “This case has shown that maybe the public isn’t ready for full abolition but we think they are ready for abolishing it for nonviolent crimes.”

The Chinese government does not release statistics on the number of executions it performs. Groups like Amnesty International, which track the cases in the media, say the reports may underestimate the total number of executions carried out, since the media tend to report only the most sensational crime and corruption cases.

Still, China has cut the number of executions it carries out every year from 8,000 in 2006 to 4,000 per year now, according to the San Francisco-based Dui Hua Foundation. Even so, it executes more people than every other government in the world put together. The next highest is Iran, with more than 360 in 2011, according to Amnesty International.

Starting in 2007, China’s Supreme Court decreed it must approve all the country’s executions. In a 2010 annual report, the court said it should “respect and protect citizens’ right to life, the most basic human right,” according to Xinhua.

Premier Wen’s remarks in March and the changes to the private banking system make Wu’s lawyer hopeful that the Supreme Court will commute her death sentence. On March 30, an editorial in the Financial News, a publication of the People’s Bank of China, said reforms in Wenzhou were a “turning point” for the development of private financing in China.

“Wu Ying’s case happened in a special time during China’s reform, where the financial system is hugely lagging behind economic development,” said Zhou, of the Wenzhou enterprise association. “Wu Ying won’t be executed now that the trial program has been announced. She can’t die before the dawn.”

To contact Bloomberg News staff for this story: Jun Luo in Shanghai at jluo6@bloomberg.net; Yidi Zhao in Beijing at yzhao7@bloomberg.net

To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net

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DeepOcean Group Wins Trenching Job for COOEC in China

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CTC Marine Projects, Ltd., a subsidiary of DeepOcean Group Holding AS, announced the award of a major trenching contract for COOEC on the Liwan 3-1 Project in China located 350 kilometres offshore Shenzhen, China.

CTC will be responsible for the trenching of approximately 174 kilometres of 30-inch pipeline from the Shallow Water Host Platform of the Liwan field development in water depth of 205 metres. For this workscope, CTC will use the MSV Volantis equipped with two ROVs and the world’s most powerful jet trenching ROV, the 2.1 Megawatt UT-1 Trencher.

imageTony Stokes, Director of CTC’s Asia Pacific operations, states, “This project, along with the recently completed project with the Volantis and UT-1 in South Korea, shows the demand for CTC’s trenching technology in the thriving South East Asia region. We look forward to a successful campaign and are very pleased to cooperate with COOEC Subsea on such an epic project.”

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China: Fujian Southeast Shipyard Hands Over Subsea-Support Vessel VOS Shine to Vroon

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On March 28th 2012, Vroon Offshore Services (VOS) took delivery of VOS Shine. The vessel was delivered from Fujian Southeast Shipyard in China and is the first of two subsea-support vessels (SSV) to be built at the Shipyard for VOS.

VOS Shine is a modern SSV with DP2-class notation and four-point mooring capabilities. The vessel has an extended moon pool, accommodation for 50, dual V-Sat dome with client and crew network, as well as satellite television. She is suitable for remotely-operated vehicle (ROV)/survey and construction diving jobs and will be commercially available in Europe from June.

The vessel will leave the Shipyard in the coming days and will be operated by Vroon Offshore Services B.V. in Den Helder.

VESSEL PARTICULARS

Length o.a 59.25 m

Beam 14.95 m

DP Class Class 2, ABS

Accommodation Total of 50

Cranes

Main crane: SWL – 24mt SWL @ 8m, 6mt @ 19m max. outreach

Service crane: PS – SW – 3mt x 9m outreach

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South China Sea Spat Threatens Region’s Future

An aerial view shows the Pagasa (Hope) Island, which belongs to the disputed Spratly group of islands, in the South China Sea located off the coast of western Philippines in this file photo taken on July 20, 2011. (Reuters Photo)

Territorial disputes in the South China Sea, rich in oil and natural gas reserves, require a quick and peaceful resolution to boost energy production and meet growing regional demand, a US official said.

“You have this conundrum of a region that needs energy and yet has a lot of territorial disputes or gray areas that inhibit the ability to produce some of it,” Robert Hormats, US undersecretary of state for economic growth, energy and the environment, said today at a briefing in Hanoi. “These are long-term investments, so you really need to start now if you’re going to have the energy five years or 10 years out.”

Vietnam and the Philippines have rejected China’s map of the South China Sea as a basis for joint oil and gas development, leading to clashes in one of the world’s busiest shipping lanes. China claims “indisputable sovereignty” over most of the waters, including blocks off Vietnam that Exxon Mobil Corp. and Russia’s Gazprom OAO are exploring.

Vietnam’s Foreign Ministry said March 15 that Cnooc’s moves to develop the oil- and gas-rich northern areas of the South China Sea violates its sovereignty. China’s biggest offshore oil explorer opened bids to foreign companies last year for 19 blocks near the disputed Paracel Islands, according to its Web site.

The South China Sea may hold 213 billion barrels of oil, equivalent to 80 percent of Saudi Arabia’s reserves, according to Chinese studies cited in 2008 by the US Energy Information Agency.

Bloomberg

South China Sea Spat Threatens Region’s Future | The Jakarta Globe.

Watching World Energy: Turmoil in the South China Sea

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Thursday, March 22, 2012

Even as world attention is mesmerized with the Strait of Hormuz, worrisome problems are now arising in the South China Sea, a region along the all-important energy sea lane of communication out to Asia Pacific.

‘You have this conundrum of a region that needs energy and yet has a lot of territorial disputes or gray areas that inhibit the ability to produce some of it,’ said Robert Hormats, U.S. undersecretary of state for economic growth, energy and the environment.

Hormats’ remarks came after the Philippines said that it has the right to invite foreign companies to explore for oil and gas in waters located between its western coast and the South China Sea – remarks dismissive of China’s own claims.

‘It is illegal for any country, government or company, without the Chinese government‘s permission, to develop oil and natural gas in waters under Chinese jurisdiction,’ said Chinese foreign ministry spokesman Hong Lei.

EXPLORATION ANNOUNCED

The dispute arose after the Philippines’ Energy Secretary Jose Almendras announced that his country had invited international oil companies to explore for oil and gas offshore Palawan province in two areas that fall within the country’s 200-mile exclusive economic zone.

Palawan province faces the South China Sea, which is claimed entirely by China. But other nations in the region, including the Philippines, Brunei, Malaysia, Taiwan and Vietnam, have competing claims of their own.

Claims over portions of the sea can have immense bearing on ownership of any oil or gas that lies under the region’s waters, according to the U.S. Energy Information Administration. But no one knows for sure just how much oil and gas is actually there.

According to EIA, one Chinese estimate suggests potential oil resources as high as 213 billion barrels of oil (bbl), but EIA also mentions a 1993/1994 estimate by the U.S. Geological Survey which put reserves at just 28 billion bbl.

EVIDENCE QUESTIONED

EIA notes speculation that the Spratly Islands could be an untapped oil-bearing province, but it said that, ‘There is little evidence outside of Chinese claims to support the view that the region contains substantial oil resources.’

Of course, there is only one way to find out and that is to explore, explore, explore. The problem, though, is that overlapping claims to the region are hindering exploration.

That was certainly true a year ago when two Chinese vessels threatened to ram the Veritas Voyager, a survey ship hired by U.K.-based Forum Energy PLC.

The Philippines government dispatched a surveillance plane, patrol ships and light attack aircraft to the disputed area, known as Reed Bank. By then, though, the Chinese vessels had vanished and Forum decided to suspend its exploration activities.

Now, a year on, Forum Energy apparently is planning to return to Reed Bank, aiming to drill its first well for oil and natural gas, an event that some analysts say could spark a military crisis if China responds more aggressively than it did last year.

TOP PRIORITY

Still, that year has seen a significant change in the posture of the U.S. in the region, with President Barack Obama announcing in January that Asia Pacific is now his country’s top priority in terms of global defense.

That view was underlined in early March by Admiral Robert Willard, head of the U.S. Pacific Command, who said that the America’s military must be present in the South China Sea.

China was less confrontational in 2011 in asserting its claims in the South China Sea than it was in 2010, Willard told the Senate Armed Services Committee.

But Willard also noted that China continues to challenge vessels conducting oil and gas exploration within space that it claims as its own. In a word, he said, ‘They remain aggressive.’

LITMUS TEST

Just how aggressive they will remain is yet to be determined, perhaps by U.S. plans for war games in April with the Philippine navy near Reed Bank – war games that one analyst suggests will be viewed by China as provocative.

‘This will be a litmus test of where China stands on the South China Sea issue,’ said Ian Storey, a fellow at the Singapore Institute of Southeast Asian Studies.

According to Storey, the Chinese ‘could adopt the same tactics as they did last year and harass the drilling vessels, or they might even take a stronger line against them and send in warships.’

Contribution by Eric Watkins from Oil Diplomacy
Link to original article

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China: COSCO Orders Ellis’ Cleats for New Drillship ‘Dalian Developer’

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Yorkshire-based cable cleat manufacturer, Ellis has turned the tables on the international trend for cheaply manufactured products from the Far East being sold into the UK by securing a significant order from China.

The company’s Emperor cleats have been specified by COSCO Engineering for installation on the Vantage Drilling Company’s new drill ship, the Dalian Developer. The order was secured as a result of the company’s persuasive technical argument, which highlights the vital importance of correctly tested and specified cable cleats.

Tony Conroy, the export sales manager for Ellis, explains: “The growth in cheaply manufactured cleats has certainly muddied the picture in recent times, but we have always remained confident that our approach would eventually see our technically superior products come to the fore in China.”

Ellis’ technical approach has brought the company widespread global success and its cleats are now used in a number of major projects in the oil, gas and power generation industries including Lusail City in Qatar and the Kashagan project in Kazakhstan.

“It certainly seems like our technical and safety based message is really striking home,” continued Conroy. “People now know that underspecified cleats can pose serious safety issues. And when you consider the amount of money some of the projects we’re working on are worth you certainly wouldn’t want to be the specifier who cut costs by ordering cleats that were simply not suitable for the job.”

Ellis is supported by a worldwide network of specialist distributors covering Europe, Middle East, Asia, South America, Australia, Kazakhstan and the United States. For this latest order the company’s export team worked closely with Hong Kong distributor, Wang Yip Hong (J&P) Limited and its Chinese partner, Senkori Trading (Dalian) Co.

The $500million Dalian Developer is being built at COSCO’s Dalianshipyard in China and is due for completion in July 2012. It is a MPF 1000 6th Generation Ultra Deepwater Drillship for use in harsh environments, has a hull size of 291m x 50m, and is designed to drill wells at ultradeep water depths up to 10,000ft and drilling depths exceeding 30,000ft.

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BP Gets Approval for South China Sea Exploration

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The Ministry of Commerce, People’s Republic of China, has granted consent to British Petroleum (BP), for an exploration drilling in the South China Sea in partnership with CNOOC, China Daily reveals today.

BP and the block operator CNOOC signed a deal for the exploration at the 43/11 deepwater block in South China Sea in January last year, but the agreement was subject to the Government’s approval.

This is BP’s second project in the deep waters of South China Sea after it had bought a stake in the Block 42/05 from Devon Energy China Ltd., in September 2010.

China daily reports that the partners in the project plan to use China’s first and only home made deepwater semi-submersible drilling rig Offshore Oil 981.

Asked when the exploration drilling would begin, BP China President Chen Liming told Reuters: “When we start depends on many factors, such as whether the drilling rig is ready. We hope to start drilling there by the end of the year.”

BP has been operating in China since the early 1970s and has business activities which include offshore gas production, chemical joint ventures, LPG import and marketing, oil product and lubricant retailing, chemicals joint ventures manufacturing ,technology licensing etc. According to China Daily, the British oil giant has so far invested more than USD 5 billion into China.

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