By Xu Yihe

SINGAPORE, July 25, 2003 (Dow Jones) — China National Petroleum Corp., China’s largest oil and gas company, has discovered 2 billion barrels of crude oil reserves in Sudan’s Malut basin, boosting the company’s crude reserves in the African country, China Petroleum News reported.

Of the total reserves discovered, 600 million barrels are recoverable, said the CNPC-sponsored newspaper.

The discovery was made at Blocks 3 and 7, near the Palogue structure, in which CNPC holds a 41% stake. The remaining stakes are held by Qatari Gulf Petroleum Co. and two Sudanese companies.

The company plans to develop the two blocks by March 2005 into a medium-sized field, with an annual production capacity of 8 million tons, the report said.

When the two blocks start production in 2005, CNPC expects to raise its crude production in Sudan to 24 million tons/year from 12.68 million tons last year. CNPC’s 2003 crude production in Sudan is forecast at 14 million tons.

Sudan is CNPC’s largest overseas oil and gas operation. The company is involved in oil and gas E&P in Block 1/2/4 and Blocks 3, 7, 6 in Sudan .

CNPC has drilled nine exploration wells at Blocks 3 and 7, which cover a total of 72,000 square kilometers. All the wells have demonstrated hydrocarbon presence, the report said.

One of the wells, Palogue 1, was tested to flow 5,100 bbl/day in October last year and 2,250 bbl/day in January this year, the report said.

According to the report, exploration at Blocks 3 and 7 started in 1975, when ChevronTexaco Corp. (CVX) discovered 168 million bbl of crude reserves. ChevronTexaco didn’t develop the reserves due to its small scale.

The report said the finding cost at Blocks 3 and 7 is less than 22 cents/bbl, or about 20% of the international average.