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Shell and Unocal pull out of a Chinese-led natural gas project

Kyodo News Service: Japan will continue exploring for natural gas resources despite Wednesday’s announcement by oil majors that they would pull out of a Chinese-led natural gas project in the East China Sea, the industry minister said Thursday. Shell and Unocal said their decision to withdraw was a result of a one-year period of appraisal. They did not say whether their decision was related to the row between the two Asian neighbors.

Sep 30, 2004

“Japan has remained unaffected by it,” Minister of Economy, Trade and Industry Shoichi Nakagawa told a news conference in reference to the announcement by the Royal Dutch/Shell Group and U.S.-based Unocal Corp.

“We will keep on implementing it,” he said in reference to the natural gas exploration activities Japan has conducted within its exclusive economic zones in the waters off western Japan.

The Chinese natural gas development project, which involves an area of about 22,000 square kilometers, includes the development of the Chunxiao gas field, which spreads over a 1,225-square-km area.

Gas production in the Chunxiao field is expected to begin in mid-2005 as scheduled, China says.

Japan has repeatedly protested to China over the Chunxiao gas field project, saying it taps undersea reserves close to the “median line” of separation for the two nation’s exclusive economic zones.

Japan argues it has a right to claim a share if resources are found in the Chinese zone where it straddles the line.

Nakagawa said, “I have heard that they (the oil majors) have judged that the project would not be commercially profitable.”

“Their judgments are based on economic considerations. Japan’s natural resources exploration is different from theirs,” he said.

China does not recognize the median line as the demarcation, saying that the border is where the continental shelf ends. That would give China a far larger zone.

The two oil majors said they decided not to proceed with the project for “commercial reasons.”

Shell and Unocal said their decision to withdraw was a result of a one-year period of appraisal. They did not say whether their decision was related to the row between the two Asian neighbors.

Copyright 2003 Kyodo News Service

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