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Brightoil Petroleum (Holdings) Limited has announced that its wholly owned subsidiary, Win Business Petroleum Group (Grand Desert) Limited, has entered into a construction framework agreement with CNPC Chuanqing Drilling Engineering Co., Ltd. (CCDEC) for the development and construction of its first upstream asset - Tuzi natural gas field.

According to the framework agreement, Brightoil has agreed to pay a total consideration of approximately RMB 1 billion (approximately HK$1.188 billion).

Subsequent to the agreement, Brightoil and CCDEC will sign formal contracts within 15 working days, and the group is required to make an upfront payment of 30 percent of the total consideration within 22 working days upon receipt of the business tax invoice from CCDC after signing of the formal contracts, whilst the remaining balance will be payable by installments over the construction period.

Brightoil said it plans to finance the development by internal resources and bank facilities. The expenditure will cover the cost of full development of the field, including drilling of up to 14 new wells, the construction of all necessary roads and bridges, drilling pads and pipelines, gas production and gathering facilities, as well as connecting the gas field to the gathering facilities. Once fully completed, the gas facility can reach a daily production capacity up to 3,600,000 cubic meters.

Commenting on the development, Dr. Sit Kwong Lam, Chairman and CEO of the group, said, “The Tuzi gas field is our first upstream project, commencement of development not only marks an important milestone to the group, but also proves our determination to become one of the leading global energy conglomerates.”

Dr. Sit added, “The Tuzi project is targeted to commence production by the end of this year, and will enhance Brightoil’s credentials as we explore opportunities globally so that we can accelerate the pace of expansion of our upstream business.”

The Group entered into a Production Sharing Contract (“PSC”) with China National Petroleum Corporation in August 2009. Under the terms of the contract, both parties are able to recover their past investments, before sharing revenue from remaining gas balance on a proportion of 49 percent to the Group.

Technical studies for the Overall Development Plan (ODP) for the Tuzi natural gas project were initiated in January 2010 and a first draft was completed by the end of December 2010. Subsequently, the ODP was submitted to the relevant government bodies for review and approval.

"With the ODP completed, the group now has a clear understanding of the Tuzi project and the positive impact it will have on the group’s business," Brightoil said in a statement.