VZCZCXRO2103
RR RUEHHM RUEHLN RUEHMA RUEHPB RUEHPOD
DE RUEHIN #1317 1630236
ZNR UUUUU ZZH
R 120236Z JUN 07
FM AIT TAIPEI
TO RUEHC/SECSTATE WASHDC 5599
INFO RUEHZN/ENVIRONMENT SCIENCE AND TECHNOLOGY COLLECTIVE
RUEHBJ/AMEMBASSY BEIJING 6900
RUEHUL/AMEMBASSY SEOUL 8713
RUEHKO/AMEMBASSY TOKYO 8850
RHMFIUU/DEPT OF ENERGY WASHINGTON DC

UNCLAS TAIPEI 001317 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DOE FOR INTERNATIONAL PUMPHREY 
 
E.O. 12958: N/A 
TAGS: ENRG EPET ECON CH TW
SUBJECT: PRC/TAIWAN JOINT VENTURE TO EXPLORE OIL IN TAIWAN 
STRAITS 
 
 ¶1.  SUMMARY. The PRC and Taiwan are both actively seeking 
new energy sources and compete for oil 
concessions in the same countries.  However, the PRC and 
Taiwan are cooperating to explore for petroleum in the Taiwan 
Strait.  This is part of an effort to triple energy 
exploration spending by Taiwan by 2010 and is the first 
instance of cross-Strait joint exploration for energy 
resources and may be a portent 
of things to come.  END SUMMARY 
 
TAIWAN TRIPLING ITS OIL AND GAS EXPLORATION BUDGET 
--------------------------------------------- ----- 
 
¶2.  Taiwan, which imports more than 98 percent of its energy 
needs, hopes to double its oil and gas reserves in five years 
to provide a cushion against rising costs of oil.  Part of 
the plan is to more than triple annual exploration spending 
to NT$10 billion (about US $300 million) by 2010 from the 
current NT$3 billion.  The doubling of oil prices over the 
past five years has triggered the unprecedented quest for oil 
and gas.  According to CPC's Director of Overseas Operations 
John Hsu, the investments are mostly joint-ventures to lessen 
the risk.  Currently, Taiwan has oil fields in the following 
countries (figures indicate Taiwan ownership percentage) : 
Venezuela 17.5 %, Ecuador 61 %, Indonesia 16.7 %, Australia 
25 %, and the U.S. 22.5 %.  Because investments in volatile 
regions such as Southeast Asia and Latin America run the risk 
of expropriation and civil unrest, Taiwan is focusing on 
stable areas such as the Gulf of Mexico and Australia for 
exploration, and it has not neglected its own backyard--the 
Taiwan Strait. 
 
JOINT VENTURE WITH THE PRC IN TAIWAN STRAITS 
-------------------------------------------- 
 
¶3.  In 2002, Taiwan's CPC and PRC's China National Offshore 
Oil Corp (CNOOC) signed a joint venture contract to establish 
the "Tainan-Chowshan Petroleum Operation Company" to explore 
for oil in the Taiwan Strait.   CPC through its overseas 
wholly-owned subsidiary, Overseas Petroleum Investment 
Corporation (OPIC) signed the contract with CNOOC.  The 
joint-venture company is registered in the British Virgin 
Islands.  The joint venture is a 50-50 profit sharing 
arrangement by both parties.  The PRC provides logistical 
support at the port of Shenzhen where CPC has set up an 
office, whereas Taiwan provides technical experts.  According 
to CPC's Hsu, PRC drilling companies won the bidding since 
they have the 
advantage of low cost and proximity to the exploration tract. 
 The tract lies SW of Taiwan at the territorial sea border 
between Taiwan and the PRC (21-23 degrees North Longitude; 
116.5-118.5 Latitude).  The first well drilled on the PRC 
side in November 2003 was dry, but geological data obtained 
was useful for subsequent drilling.  The second well will 
begin drilling on the Taiwan side at the end of 2007.  The 
exploration area has estimated natural gas reserves of 6 
billion cubic meters. 
 
FEAR FOR NATIONAL SECURITY 
-------------------------- 
 
¶4.  (SBU)  Taiwan authorities initially withheld approval of 
this project for fear that national security might be 
compromised.  The Mainland Affairs Council (MAC) supported 
the move although it took nearly to approve the drilling for 
the second well (DP21-1-1).  While cooperation has been good 
so far on this joint venture, CPC's Hsu told AIT that when 
CPC tried to get into Angola to discuss oil exploration, 
visas for its technical personnel were denied under PRC 
pressure. 
YOUNG