(Yicai) June 9 -- Sino Geophysical’s stock price jumped after the Chinese firm said it has begun production at its first independently explored offshore oil and gas project in the South China Sea.

SinoGeo’s shares [SHE: 300191] closed 11.7 percent higher at CNY19.84 (USD2.80) each in Shenzhen today, after earlier surging by their exchange-imposed 20 percent daily trading limit.

The Weizhou 5-3 oilfield project, located in the Beibu Gulf of the South China Sea, started production on June 6, Beijing-based SinoGeo announced early today. The first oil output has already arrived ashore, it added.

The project represents the first offshore oilfield independently explored and developed by Smart Oil Investment, a wholly owned overseas unit of SinoGeo, marking a key milestone in the private company's strategic transformation and demonstrating its technological capabilities in finding and developing resources, it said.

The oilfield lies in Block 22/04 of the South China Sea. In 2018, Smart Oil and its then-business partner secured the exclusive exploration and development rights from China National Offshore Oil Corporation. After the partner withdrew in 2022, Smart Oil became the block’s sole explorer and developer.

Shares of state-owned CNOOC also gained today, with its stock [SHA: 600938; HKG: 0883] adding 1.2 percent in Shanghai and 1.3 percent in Hong Kong.

Under the revenue sharing agreement signed with CNOOC, Smart Oil and its partners are entitled to 49 percent of any oil and gas production within Block 22/04, covering also the Weizhou 5-3 oilfield’s 15-year production period. CNOOC gets the rest.

Smart Oil is also entitled to recover its exploration costs of about USD52.4 million from project sales revenues, in a way that the two sides agreed upon earlier.

The Weizhou 5-3 oilfield is located in waters about 80 kilometers from Beihai in China’s Guangxi Zhuang Autonomous Region and around 40 meters deep. The plan for its development includes drilling seven production wells along with additional support infrastructure.

The project is expected to reach peak production of around 10,000 barrels of oil equivalent per day by 2026. Over its 15-year life, it is projected to yield a cumulative output of 14.5 million boe.

The oilfield is the first commercial project within Block 22/04. According to the announcement, Smart Oil will use its production performance and operational data to refine the development plan for the entire block.

SinoGeo is exploring and developing oil and gas assets across six blocks in China, one in Mongolia, and one in Texas, the United States. The six domestic projects include onshore blocks in northwest China, offshore areas in the Bohai Sea and South China Sea.

Last year, SinoGeo produced 129,900 tons of crude oil, generating CNY471 million (USD65.5 million) in sales, which accounted for 97 percent of the company’s annual revenue. The rest came from exploration technical services and equipment leasing, according to its latest annual report.

Editor: Emmi Laine