KUWAIT - China.

KUFPEC China now is the most profitable unit in the company. High profit comes from its the Yacheng gas field, offshore. The gas has been sold to a power plant in Hong Kong since the beginning of 1996. KUFPEC China's operating partner at Yacheng is BP (Arco).

The gas is mostly supplied to Hong Kong's new Castle Park power plant (a JV of China Light Power Co. and Exxon Energy) under a 20-year agreement for 2.9 BCM per annum. KUFPEC's stake in the field came from Santa Fe, a US-based company acquired by KPC in 1981 and now mostly being sold.

Yacheng, 93 km south of Hainan island in the South China Sea, has proved to be the largest offshore gas field in China. Initially a JV between Santa Fe Minerals (Asia), Arco China, and the China National Offshore Oil Corp (CNOOC), the venture was restructured in 1989. This followed an agreement concluded on Nov. 23, 1988. KUFPEC took over Santa Fe's share and raised it to 30%. When the discoveries were delineated, a PSA was signed under which CNOOC held 51% and the remaining 49% was shared on the basis of 34.3% for Arco and 14.7% for KUFPEC. The partners have invested a total of almost $1.5 bn since 1983.

The block is called Yacheng 13-1, in the Qiongdongnan Basin, with BP being the operator. Discovered in 1983, the field holds 3.2 TCF of reserves recoverable at low cost and has 96.8 TCM of gas in place. It has been fully developed. Production started in late 1995. Deliveries to Castle Park began on Jan. 1, 1996 after the completion of tests on a 28-inch, 778-km marine pipeline to Hong Kong which is one of the longest undersea pipelines in the world.

The field's output has peaked at 484 MCF/day (5 BCM/year) since mid-2000. About 280 MCF/day are supplied to the Hong Kong power station. The rest is sold to industry in Sanya City on the southern tip of Hainan island. The gas is separated on one of two offshore production platforms. The condensate is pumped ashore through a 100 km, 14-inch pipeline to Sanya City. The treated gas is then pumped to Hong Kong.