(Yicai Global) Feb. 16 -- Shares in Sino Geophysical soared as much as 6 percent today after the Chinese oil and gas explorer said a subsidiary has obtained the 30-year rights to develop an oilfield in the South China Sea.

Sino Geophysical’s share price [SHE:300191] closed up 3.46 percent at CNY26.64 (USD4.20). Earlier in the day it had hit CNY27.30.

Unit Smart Oil Investment will invest USD18 million to develop the 102-square-kilometer oilfield, which lies 40 meters below sea level near Weizhou Island in the Beibu Gulf, Beijing-based Sino Geophysical said yesterday. The lease has been signed with state-owned China National Offshore Oil Corp.

Block Nanhai 22/05 has proven oil and gas reserves of between 34.1 million and 56.8 million square meters, it said. Once extraction starts, output is expected to reach as much as 1.1 million square meters a year. Smart Oil will receive 49 percent of all profits and CNOOC the rest.

Offshore exploration should start within the next six months with the aim to begin wildcat-drilling this year, it said. It costs around USD6 million to drill a single well. Smart Oil will use its own capital plus funds raised through loans and equity financing to fund the project, it added.

Smart Oil has already signed several contracts with CNOOC for offshore oil development in the Bohai and South China Seas, one of which is Nanhai 22/04, which lies next to this block.

China’s oil exploitation used to be monopolized by three state-owned oil giants, PetroChina, Sinopec and CNOOC, but it has been opened up to private firms in recent years to improve competitiveness.

Editor: Kim Taylor